Research and Tracking Report on Major Categories of Assets and Funds: Are Commodities Rebound or Reverse?
Core viewpoints
The core of the current commodity rebound is Sino US resonance inventory replenishment+global liquidity easing+geopolitical impact on the supply chain. We believe that this round of Sino US replenishment also lacks continuity. This round of commodities is similar to 2014H1, which is a rebound rather than a reversal. Q2 Global liquidity easing will begin to shrink. The two major factors supporting the rise of commodities in the past period, inventory replenishment and liquidity easing, will be reversed, and the rebound of commodities may come to an end. At the same time, with the lack of follow-up inventory replenishment in the United States, the U.S. economy will be weaker than expected. At that time, the expectation of interest rate reduction in the United States may rise again, and it is difficult to sustain the upward trend of U.S. bond interest rates.
The core of the current commodity rebound: Sino US inventory replenishment+global liquidity easing+geopolitical commodities have rebounded strongly since the beginning of the year. The CRB index has risen by 7.7%, basically recovering the decline in 2023. Gold continues to hit new highs, copper prices are approaching historical highs, and crude oil returns to a technical bull market. We believe that there are three core reasons for the rise of commodities: (1) Sino US resonance replenishment. The impetus for replenishment is mainly from the stabilization of the global manufacturing industry. (2) Global liquidity is loose. (3) The impact of geopolitical events on the supply chain.
The current commodity is similar to 2014H1, rebounding rather than reversing
In H1 2014, China and the United States experienced a wave of resonance inventory replenishment, and the CRB commodity index experienced a wave of 9.6% increase. However, due to the lack of continuous inventory replenishment, commodity prices fell again. We believe that this round of Sino US replenishment also lacks continuity. This round of commodities is similar to 2014H1, which is a rebound rather than a reversal. The leading indicators all point to the downward turning of PMI in global manufacturing industry in 2024Q2, which will impact non-ferrous metals and other commodities from the demand dimension. At the same time, Q2 global liquidity easing will begin to shrink. The two major factors supporting the rise of commodities in the past period, inventory replenishment and liquidity easing, will be reversed, and the rebound of commodities may come to an end.
Main impact: If the rebound of commodities ends, the interest rate of commodities and US bonds and the US dollar index have risen at the same time since the beginning of the year when the US interest rate cut expectations or were raised again. The main reason is that the inflation of the US continues to exceed expectations due to the rise of commodities, the interest rate cut expectations continue to drop, the US bond interest rate rises, the inflation transmission of commodities to the US is stronger than that of Europe, and the inflation in Europe has declined in the past two months, The inflation in the United States rose more than expected, leading to the appreciation of the dollar index. We believe that this commodity rebound may come to an end, and with the lack of follow-up inventory replenishment in the United States, the U.S. economy will be weaker than expected. At that time, the expectation of interest rate reduction in the United States may rise again, and the upward trend in U.S. bond interest rates will be difficult to sustain.
Risk tip: the results of this report are calculated based on the corresponding asset pricing models of the major categories, and the risk of model failure should be warned; History does not represent the future, so we need to be alert to the risk that historical laws will not repeat; The model results are only for research reference and do not constitute investment suggestions; At present, conflicts in overseas regions are still not over, and we still need to be alert to the risk of large-scale escalation of conflicts in local regions; The US raised interest rates quickly in the early stage, while the US economy has a certain degree of resilience, so we need to be alert to the lagging impact of the future US fiscal stimulus weakening, superimposed on the sharp rise of interest rates in the early stage; The inflation center will move up in the future compared with the past 10 years, and we should be alert to the risk of long-term high US bond interest rates. At present, China's economy is more affected by domestic and international factors, and we still need to be alert to the risks brought by the slower than expected domestic economic growth.
