Weekly Briefing 1/3/20 - The Forecast

Weekly Briefing 1/3/20

Weekly Briefing 1/3/20

During the commodity bull market of the 2000-2011 period, energy led and eventually passed the baton to the monetary metals in the second half of 2007-2011. During this current commodity boom which began in 2016, metals have led while energy has lagged, the inverse.

Metals have been king from 2016-2021 while energy has lagged. Their bull market will not end until 2026.

Look for metals to consolidate and energy to take the lead.

As the economic recovery slowly continues into 2021, real traction will not be seen until the second half of the year. The stock market is forward looking and a flood of liquidity should continue from the Fed and US Treasury into the first half of 2021. As vaccinations reach most of the population by mid-year, the liquidity injections will be stopped as the economy begins to stand on its own again. The stock market will react with a poor second half in 2021. Money and capital always need a home. Look for money flow to pour into the energy sector as a recovering global economy starts to consume more of it. New oil and gas wells and exploration have been virtually non-existent since Covid began. As demand increases and supply remains capped, price in the energy space will rocket. Commodities like crude and natural gas will do well, but the real returns will be in the oil service sector. In closing, a Wall Street recovery will peak mid year while a Main Street recovery gains steam starting mid 2021 into year end.

Metals will produce nice gains in the first half of the year and then stall. Energy should trend throughout the entire year. This trade has just begun and will not likely stop until 2024.
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