Commodities, aside from gold, mostly had a bad year. Figure 3 shows how commodities have developed in comparison to the US stock market. The essence is that commodities have never been worth so little in comparison to equities and after each crisis, there was a huge turning point. The worst start in 2020 certainly had oil, whose futures (WTI Crude) went negative when the crisis picked of steam in developed economies, which was thought to be impossible. It then recovered fairly quickly and stabilized at $40 for WTI Crude ever since, which was the case for most commodities. Towards the end of November, it started to surge again and continued to do so in December and is currently at $47 per barrel. A major driver for this development is certainly the start of vaccinations and the expectations of going back to normal relatively soon. Brent crude oil experienced a similar rally, although it started to soar earlier and thus gained a bit more than WTI. Brent Crude is now trading at $50 per barrel. Another commodity that has recovered very well is copper. It is trading at 7,068$/mt and has just slightly surpassed its highs from early 2018. During the crisis, it was trading at around 5,000$/mt. Furthermore, the price of copper is unlikely to decrease in the near future, as the stockpiles have not been as low since 2014
Alternative Markets Update October 2020 - Macro and Political Outlook November 2020 by Macro Eagle11/11/2020
DeFi is probably the topic in the crypto space in 2020 and its steep rise during the summer. DeFi started with a total value locked in the area of millions in the year and is (as of November) at around $12.5bn. This development is also not expected to fade away towards the end of 2020, although it seems possible that there will be a decrease in growth compared to the summer. Figure 14 shows the DeFi ecosystem separated in sub-categories.
Macro and Political Outlook November 2020 by Macro Eagle
Should we get a Blue Wave, then the “consensus trades” are rotation from Growth into Value (on stimulus), overweight infrastructure/green-energy, short Treasuries (rising yields), short US Dollar and long selected Emerging Markets (like Mexico). The biggest risk in the short-term would be a sell-off due to fear of change in tax policy (wealthy Americans locking in “Stepped-Up Basis”, capital gains rate and/or Tax Loss Harvesting). The medium-term risk are higher US yields/curve steepening on the back of stimulus. For a quick overview of the other scenarios (already amply covered elsewhere) see short summary below. Also important to keep the portfolio on the right side of what won’t change, whatever the outcome: (1) More stimulus and hence higher yields; (2) China bashing; (3) Big Tech under political pressure and (4) the green-energy transition. The latter obviously turbo-charged if Biden comes in. |
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