Commodities are typically one of the go-to asset classes when terms like “Stagflation” start to enter the headlines.
This week, the World Bank warned that the COVID-19 pandemic and the Russian invasion of Ukraine were contributing to a slowdown in the global economy, leading to “what could become a protracted period of economic growth and elevated inflation.” That perilous combination has been dubbed “Stagflation.
It is becoming more evident, day by day, that Central banks across the world are fighting a losing battle against rapidly surging inflation and no matter what actions they take now, it will be nowhere enough to tame ever-rising inflationary pressures.
Forecasts suggest that the global economy is likely to shift from an economic recovery to Stagflation in the coming months. Even Fed Chair Jerome Powell has finally admitted that Inflation will jump this year.
His comments follow U.S Treasury Secretary Janet Yellen, conceding she was “wrong” last year about how severe inflation would be.
“There have been unanticipated and large shocks to the economy that have boosted energy and food prices and supply bottlenecks that have affected our economy badly, that at the time I didn’t fully understand. But we recognize that now,” Yellen said.
Looking back throughout the whole of 2021, the Federal Reserve played down the biggest year-on-year rise in inflation seen in more than four decades – characterizing the record spike as “transitory”, which inevitability will always be remembered as the worst inflation call in the history of the Fed.
Fast forward to today – inflation is running at multi-decade highs around the world and still rapidly accelerating.
If inflation continues to surge at the current pace across the world, then we’re only months away from a return to double-digit inflation on the same scale last seen in the 1970s.
As traders very well know – every 1% rise in inflation – ultimately equates to a 10% move higher in Commodity prices.
With inflation now running between 8-9% across many of the world’s major economies – it comes as no surprise that a total of 27 Commodities ranging from the metals, energies to soft commodities have tallied up astronomical double to triple digit gains, already within the first 6 month of 2022.
And this is just the beginning!
A long list of leading Wall Street banks from Goldman Sachs, JPMorgan to Bank of America have described commodities as their “preferred asset class over the next decade”. Last month, Warren Buffett, also joined that list – revealing that his biggest investment ever is currently riding on the Commodities Supercycle.
In the words of Buffett, “the Commodity markets right now, represent one of the greatest generational opportunities of our lifetime, not to be missed.”
Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions: