Arion’s Heavy Metal 2021– Commodities in Charts

In this commodity wrap we decided to let charts do the talking – looking back at last year’s moves as well as the likely major factors influencing the sector over the year coming.

• 2020 returns
• Fiscal Stimulus / Infrastructure Spend
• Inflation
• Weaker USD
• Commodities relative to other asset classes

Commodities performance in 2020

Winners & Losers

• Chart shows big rally from Q32020
• Large underperformance of index funds driven by overweight exposure to oil (BCOM 30% / GSCI +60%)

Fiscal Stimulus / Infrastructure Spend

“The government should pay people to dig holes in the ground and then fill them up.” – John Maynard Keynes

• According to Fitch Solutions, Global construction industry real growth will reach 4.1% y-o-y during 2021, the fastest annual growth rate seen in over 20 years, following a historic fall of -2.5% y-o-y during 2020.  They expect the global construction industry value in 2021 to stand at a considerable $5.0tn
• Infrastructure project financing was down about 75% from 2019 due to the Covid pandemic. When combined with the macro environment post-covid, pent-up demand could mean the pandemic was a ‘black-swan’ moment for a protracted infrastructure boon

Inflation

• US 5, 10 & 30 year breakeven inflation rates have all surpassed May 2019 highs and are on course to continue the push after Fed chair, Jerome Powell, announced last summer that the central bank would allow periods of higher inflation
  

A weaker USD 

Asset Allocation…commodities cheap?

28/01/2021

Important information: This document is issued by Arion Investment Management Limited (“Arion”) which is authorised and regulated by the UK Financial Conduct Authority (the “FCA”). It is intended for the use of clients of Arion only. This document is intended for institutional investors and professional clients. It is not to be distributed to or relied upon by retail investors in any circumstances.

The information and opinions in this document are believed to be current and accurate in all material aspects as at the date of its release and to compiled or arrived at based upon information obtained from sources believed to be reliable and accurate. Arion makes no representation or warranty as to the accuracy or completeness of this document and accepts no liability for any inaccuracy or omission. Information obtained from third parties has not been independently verified by Arion.  Arion does not accept any responsibility to update this document or any opinions expressed in it based on any information obtained after the date of its release.

This document is for informational purposes only.  All comments, opinions and content contained in this document are of a general nature and do not take into account the personal investment aims, financial situation or requirements of any investor or potential investor. 

The information in this document does not constitute an offer to sell or the solicitation of an offer to purchase any investment product or service. The value of investments and the income derived from them can fall as well as rise. Investors may not get back the amount originally invested. Past performance is not an indicator of future returns or results. Before acting upon anything associated with this document Arion recommends that specific investment advice is taken.

This document is a marketing communication and has not been prepared in accordance with the requirements of any jurisdiction designed to promote the independence of investment research. It is not subject to any prohibition on dealing ahead of the dissemination of investment research.

About Arion: Arion is a commodity focused investment adviser and manager with offices in London. Arion is authorised and regulated by the FCA (registered no. 742037), is registered with the U.S. Commodity Futures Trading Commission (CFTC) as a Commodity Pool Operator and Commodity Trading Advisor and is member of the National Futures Association (NFA).