Wall Street’s commodities bubble huddle

The commodities bubble has begun to burst. Lumber is crashing, copper is fading and foodstuffs like corn and soy are copping it. China’s credit impulse has sunk lower than a snake’s butthole indicating base metals and bulks are next. Oil is OK but so what? It’s manipulated.

Yet, check out the latest Wall Street strategist output. JPM:

Cross-Asset Strategy: Our outlook remains positive for risky asset classes, with expectations for Equities and Commodities to have the highest return, and body yields to continue their move higher. This pro-risk view is driven by the ongoing recovery from the pandemic (starting in the US and continuing in Europe, and e.g.exemplified by the latest reading of JPM’s Global All-Industry PMI at 15-year highs), accommodative monetary stance from global central banks, and still below-average positioning in risky asset classes such as equities and commodities. Earnings growth should remain above trend in 2H, supported by consumers and capex. As inflation, relation, and reopening remain in the focus of investors, we expect a continuation of rotation from defensive into cyclical assets. We also expect commodities to continue outperforming driven by energy, and in equities we expect rotation to continue from bond proxies and growth in o value. This positive outlook should last at least during the summer months (peak reopening), but potentially well into 2022 as global economies recover from the pandemic.