I am still quite wary of commodities. Although the China bounce is underway, the property rebound is nascent and unpredictable. Moreover, global growth is facing the latest intensification of monetary tightening in the bank-inspired credit crunch. And, in my view, an unavoidable US recession. TS Lombard has a good view of the cross-currents.
The price action in commodities so far this year has played out pretty much as we anticipated back in December: rangebound trading with a downward drift and marked by metals
outperforming energy. Is this market environment likely to persist or should investors be readying themselves for a change in tune?
Glass half empty or half full? To the extent that commodities are a good coincident indicator of the global business cycle, they are still sending a “glass half empty” message (Chart 5). Several leading indicators, however, have turned somewhat more constructive recently.