Solid case for the commodities setup! The capex depression chart really nails it, reminds me of the late-90s energy underinvestment that eventually turned into the 2000s boom. One thing I'm wrestling with though is the monetary tailwinds argument given that policy transmission to commodites usually lags by 12-18 months. If we're seeing easing now, wouldn't that put peak demand closer to mid-2027? Also the correlation breakdown point is clever, narrow rallies tend to broaden before peaking, but gold's outperformancecould also just be macro hedging rather than true commodity cycle confirmation.
Thanks. On the monetary tailwinds aspect, the lead/lag in that chart is 15-months, and the global pivot to easing actually kicked-off in 2024 (and accelerated this year thanks in part to precautionary easing following the tariff shock).
In other words, we are about right on cue for commodity upside :-)
I had planned to write a follow-up brief note on this, but keep getting ambushed by the kids, lol. But yeah at a high-level I think sector ETFs can provide a decent way to get exposure, commodity futures or funds provide more direct exposure, but you can sometimes get issues with the futures roll. My plan is to crunch the numbers on commodity ETFs vs commodity stocks, aiming to get that done tomorrow.
About a year and a half ago, I started buying more and more gold. I’m at like 28% right now, and like you said, it’s done incredible well.
Would you recommend taking a small chunk and putting it into a broad based commodities etf like the ones you listed? I own a gold mining company (SNWGF) but outside of that I hold gold primarily due to stagflation risk.
Thanks, yeah I might write a short follow-up piece on this, because yes the various broad commodity ETFs will basically do the job, but they aren't all created equal + there's the matter of commodity stocks vs commodity prices........ *working*
yes, if crude oil breaks down then deflation will be on the table (ditto if the economy rolls over into recession). That's not my base case, but definitely keeping an eye on crude oil ---which probably (along with energy stocks) needs it's own off-topic chartstorm [adds to the list!]
I don't think there will be a recession, just deflation of overvalued stocks releasing funds into other areas of the economy. Utilities, pharma, Bio tek, housing as interest rates fall
Thanks, not sure if we can get a smooth orderly deflation of overvalued stocks, but I could see a scenario of bullish rotation into previous laggards (ex-tech) if we get further rate cuts, fiscal stimulus, and stronger commodity prices...
Great insights. Work isn’t a four letter word if you Love what you do!
As an aside- The Permanent Portfolio 25,25,25,25 since 1971 rebalanced yearly or even better every quarter like the Mutual Fund or 401K reporting schedules would be very insightful. The benefits will be apparent. Like turnover, less/no stress, equity consistently from bottom left to upper right!!!!
Prosperous and Peaceful 2026 to you my fine man!!!
Yes sir! I'm glad I love what I do, because it sure ain't easy :-)
Likewise best wishes for a health, happy, and profitable 26!
And yes, I will take a look at the permanent portfolio... maybe have a tinker with some modifications, could be something worthwhile tracking *thinking cap on*
Thanks Joel, indeed oil is going to be a key part of this puzzle -- almost needs a separate off-topic chart storm to deal with that (+energy stocks).
One thing that does standout to me on WTI crude is that despite all the downward pressure on oil prices, it still hasn't managed a decisive breakdown, which tells me while the bears are confident: they aren't completely in control...
Kudos and HooAh Callum ... Great Work !! This is not exactly a new frontier ... but it will be a very pleasant ride ... already is !! Thank You for going off-script !! Loved the Implied Allocations: Commodities chart ;-) !!
Thanks Ron, I'm glad you mentioned the allocations chart, that was a new one I pulled together, took a bit of work and with some very interesting findings...
Solid case for the commodities setup! The capex depression chart really nails it, reminds me of the late-90s energy underinvestment that eventually turned into the 2000s boom. One thing I'm wrestling with though is the monetary tailwinds argument given that policy transmission to commodites usually lags by 12-18 months. If we're seeing easing now, wouldn't that put peak demand closer to mid-2027? Also the correlation breakdown point is clever, narrow rallies tend to broaden before peaking, but gold's outperformancecould also just be macro hedging rather than true commodity cycle confirmation.
Thanks. On the monetary tailwinds aspect, the lead/lag in that chart is 15-months, and the global pivot to easing actually kicked-off in 2024 (and accelerated this year thanks in part to precautionary easing following the tariff shock).
In other words, we are about right on cue for commodity upside :-)
I'm curious how you prefer to position for commodities. Do you prefer individual names, sector ETFs or commodity futures?
I had planned to write a follow-up brief note on this, but keep getting ambushed by the kids, lol. But yeah at a high-level I think sector ETFs can provide a decent way to get exposure, commodity futures or funds provide more direct exposure, but you can sometimes get issues with the futures roll. My plan is to crunch the numbers on commodity ETFs vs commodity stocks, aiming to get that done tomorrow.
Finally got it done, please see: https://substack.com/@chartstorm/note/c-196659614?
Thank you for the incredibly informative piece.
About a year and a half ago, I started buying more and more gold. I’m at like 28% right now, and like you said, it’s done incredible well.
Would you recommend taking a small chunk and putting it into a broad based commodities etf like the ones you listed? I own a gold mining company (SNWGF) but outside of that I hold gold primarily due to stagflation risk.
Please see: https://substack.com/@chartstorm/note/c-196659614?
Thanks, yeah I might write a short follow-up piece on this, because yes the various broad commodity ETFs will basically do the job, but they aren't all created equal + there's the matter of commodity stocks vs commodity prices........ *working*
seems like deflation could be a story..oil? at 57
yes, if crude oil breaks down then deflation will be on the table (ditto if the economy rolls over into recession). That's not my base case, but definitely keeping an eye on crude oil ---which probably (along with energy stocks) needs it's own off-topic chartstorm [adds to the list!]
I don't think there will be a recession, just deflation of overvalued stocks releasing funds into other areas of the economy. Utilities, pharma, Bio tek, housing as interest rates fall
Thanks, not sure if we can get a smooth orderly deflation of overvalued stocks, but I could see a scenario of bullish rotation into previous laggards (ex-tech) if we get further rate cuts, fiscal stimulus, and stronger commodity prices...
Thanks for the insightful analysis!
Thanks Steve, my pleasure! Looking forward to delivering more of the same in 2026 :-)
Great insights. Work isn’t a four letter word if you Love what you do!
As an aside- The Permanent Portfolio 25,25,25,25 since 1971 rebalanced yearly or even better every quarter like the Mutual Fund or 401K reporting schedules would be very insightful. The benefits will be apparent. Like turnover, less/no stress, equity consistently from bottom left to upper right!!!!
Prosperous and Peaceful 2026 to you my fine man!!!
PD
Yes sir! I'm glad I love what I do, because it sure ain't easy :-)
Likewise best wishes for a health, happy, and profitable 26!
And yes, I will take a look at the permanent portfolio... maybe have a tinker with some modifications, could be something worthwhile tracking *thinking cap on*
Great stuff, Callum! Thanks for sharing it. I agree with all your assessments! When will the banksters take their boot off the neck of the oil price?
Thanks Joel, indeed oil is going to be a key part of this puzzle -- almost needs a separate off-topic chart storm to deal with that (+energy stocks).
One thing that does standout to me on WTI crude is that despite all the downward pressure on oil prices, it still hasn't managed a decisive breakdown, which tells me while the bears are confident: they aren't completely in control...
Kudos and HooAh Callum ... Great Work !! This is not exactly a new frontier ... but it will be a very pleasant ride ... already is !! Thank You for going off-script !! Loved the Implied Allocations: Commodities chart ;-) !!
Thanks Ron, I'm glad you mentioned the allocations chart, that was a new one I pulled together, took a bit of work and with some very interesting findings...
Here's what it looks like *excluding precious metal ETFs* https://substack.com/profile/30338892-callum-thomas/note/c-193275388?
Very telling !! Thank You Callum !!
UPDATE >>> for those who have asked what's the best way to gain exposure to commodities, here's some charts + things to consider: https://substack.com/@chartstorm/note/c-196659614?
Great info.
Thanks! I appreciate the appreciation :-)