The astonishing explosion of material two years ago has not been denied since… and its full potential remains elusive.
We finish our departure in the meanders of Incrementum’s newest baby, which is golden compassAvailable on a monthly basis since Feb 10. We are traveling today Editing mayo.
Performance and evaluation of raw materials
I offered you last summer a Abstract A detailed picture drawn by Ronald Stuferl and Marc Falk (S&V) for the sector in their report IGWT 2021. As a reminder, the Austrians considered that commodities were at the dawn of a new giant cycle.
This two-year chart reflects their amazing blast from May 2020, which hasn’t faltered since.
Below is one of the most popular charts in the report IGWT. Represents the performance of commodities versus stocks since January 1971.
As S&V wrote in a file Report IGWT 2021This graph “It shows impressively that the relative valuation of commodities versus stocks is still historically very cheap. Compared to the S&P 500, the GSCI Commodity Index (TR) is at a 50-year low. The ratio is currently at 0.48, well below its long-term average of 4.05, and miles from an all-time high.”
Since then, the ratio has stabilized and started to increase, although this is not evident in this graph, due to the accompanying increase in stock markets. In this regard, the potential of raw materials remains very high.
Finally, S&V gives us an update on this very impressive long-term chart.
Here’s what they’re planning They were saying in their report IGWT 2021: ‘After hibernating for years, commodity prices have woken up’before you expect it“It is very likely that the period of the first decade of the twenty-first century will be [à cet égard] The sixties of the last century, and the twenties of the twenty-first century will be the seventies of the last century.” For them, then, we were then, at the dawn of a new commodity-broken cycle, to which gold was no stranger.
After 9 months, we see in the updated version of this chart that the 10-year moving average annual growth rate of the US commodity price index has rebounded strongly on its very long-term support.
It now remains to be seen if the long-term S&V target (see “2045” at the top right of the chart) will also be reached.
performance of other asset classes
Note that this chart book is not limited to precious metals and goods Since 2015, S&V has also paid attention to crypto assets in its report IGWT.
This is how they present us with a graph showing the co-evolution of two major crypto assets over the past two years.
At this point, here’s what gross capitalization is about Gold vs Bitcoinand the broader US stock market.
The following table is also of great interest because it highlights the average monthly performance of the largest asset classes over the past two years. It’s the ‘Average’, ‘MAX’ and ‘MIN’ lines that will be very useful to us, as they are good ways to get a sense of the volatility for each of these asset classes.
Let’s end this presentation by placing these financial statistics in their own macroeconomic context.
The Macroeconomic Climate: Central Bank Balance Sheets, Money Supply, Inflation and the Yield Curve in the United States
As you know, the financial performance statistics we just reviewed are not separate from the actions of central banks.
Here is first of all the aggregate balance sheet of the 4 largest central banks from 2000, which exploded in 2020:
Let us continue with the increase in money supply i.e. M2 in the same economies, which also rose after restrictions.
And let’s wrap it up with this table that allows you to see at a glance, month by month, what the monetary weather has been in the major economies over the past two years, via the annual circulating inflation rate (CPI). In light of this global warming (although less pronounced in Japan and China), it is understandable why the report IGWT 2021 he is called “Change in the monetary climate”.
Finally, there are two graphs related to the US economic situation, as they relate to the yield curve.
First, this is the rate differential between the 10-year and 2-year US: when this indicator approaches zero, the yield curve flattens. a Spread Negativity has historically been a harbinger of recession. However, this lag broke through the ground for a brief period in March…
Next comes the US yield curve itself, or rather the shape it took 1 year ago (in green), 6 months ago (in light blue), 1 month ago (in dark blue) and April 29, 2022 (in gold).
First of all, we see that since last year, US rates (y-axis) have increased across all maturities (1 month to 30 years – x-axis). We also see that the yield curve in the US tends to flatten out, and even reverses towards the end of its long segment (i.e. to the right).
However, historically, coup From the yield curve one of the best indicators of recession, as we can see for example this graph which does not represent Spread Between 10 years and two years, but between 10 years and two months, over the past 50 years.
(Editor’s note: This graph is not from Incrementum’s Gold Compass)
This is what the Austrians have to show us in golden compass per month, which will allow us to stay updated between two versions of the report IGWT!