To add to Scott’s point, you’d have to admit that the downtrend in the most important commodity of all, Crude Oil, has recently showed more evidence of accelerating to the downside, as it lost support above 70 and looks headed lower despite the US government’s previous statement that it would replenish the Strategic Reserve at any price between 65 and 70. Despite that potential demand, and the fact that energy investors continue to argue the global shortage of supply, it seems to be that global demand and recession worries are determining the trend for the most dominant commodity of all.

Specifically to your points regarding all of the money printing post 2008… Commodities already caught up. I don’t see any divergence between M2 and commodities. There was divergence post 2008 but that has now been evened out with the pop post 2020.

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Commodities didn’t move higher with the stock market post 2008 for two reasons.

1.) 0% interest rates

2.) It was the slowest recovery coming out of a recession in history. Economic growth was a grind, so demand for commodities was limp.

As long as interest rates remain above 3%-4% while economic conditions continue to deteriorate, I cannot see a bull case for commodities.

Only to exceptions to that above statement:

1.) War escalation

2.) Deglobalization exponentially increasing. This ties-in with the dollar losing strength but not because of money printing.

I believe a recession is imminent, if not already in the early stages. I don’t believe the stock market has fully priced it in yet. I also believe that commodities have likely just completed the first major corrective wave in a new bull market that started in March 2020 (COVID).

I understand your point as historically, commodities typically rose along with the economic cycle due to increased demand for commodities (oil, lumber, copper, etc..). However, unprecedented & excessive intervention (QE, ZIRP, & even negative rates) by the global central banks since the 2008 financial crisis have caused imbalances & distortions in the financial markets. Simply pull a multi-decade chart of any of the general commodities indexes & you will see that instead of being in a bull market along with equities since the early 2009 bull market started, commodities started one of their worst bear markets in history back in 2008 which didn’t end until early 2020. As such, not only do the technicals point to early stage bull market in commodities but the inverse relationship between the stock market & commodities since the central banks; printing parties over the past 15 yrs could very well result in an ongoing bull market in commodities with more downside to come in equities.

What the Fed said yesterday was one more 25bps hike up to 5.00%-5.25% because they think the credit contraction that’s about to increase substantially within the banking system will be equivalent to another 100bps hike. In other words, they don’t have to hike to 6% because the stressors within the banking system will effectively do that for them to cool down the economy.

How I see it… The Fed will try to keep rates high for a long as possible. Far too long in the end. Like you said, the one thing they are consistent with is being too slow to react. So rates too high for too long, they tank the economy as much as possible, specifically the labor market, then eventually start cutting rates way down the line after all the damage is done.

From my point of view, that’s when we can start talking about being bullish commodities; when we are coming out of the damage – not heading into it.