This Unloved Market Is 2018’s Sleeping Giant
You’ve probably heard the term “sleeping giant” before.
I know I have. My mom loved talking to me about World War II when I was a kid. She’d pour me a bowl of Froot Loops at the brightly lit kitchen counter and say America was a “sleeping giant” during part of the war before going off on a tangent about politics.
I tried to keep up with her, but I was probably 7 years old, and I kept picturing the U.S. as a large, slumbering creature that looked like it sprang from the pages of Maurice Sendak’s Where the Wild Things Are.
The definition of sleeping giant goes more along the lines of this, though: “One that has great but unrealized or newly emerging power.”
And right now, there’s one market in particular that meets those qualifications: commodities.
In fact, bond king Jeffrey Gundlach — former head of the $9.3 billion TCW Total Return Bond Fund — just said the best trade in the market today would be in commodities.
In his own words: “Most investors are underweighted or completely not invested in commodities because they’ve been so quiet, so sleepy,” he said. “Commodities is my choice investment for investors to get diversified at low prices now.”
And I’ve got to say I agree with him.
Our current economic growth takes the title of one of the longest in history. And commodities tend to rally later in that cycle.
As Gundlach noted, in previous cycles, commodity prices soared by 100%, 200% and even 400% when they hit the “growth” part of the cycle.
And we’re already starting to see signs of that spike.
In early February, Goldman Sachs reported that the commodity market is sitting in its best position in a decade. Analysts were raising their price forecasts for oil, copper, iron ore and even coal.
“The 3R’s — reflation, releveraging and reconvergence — reinforce our bullish overweight commodity outlook,” Goldman analysts said. That’s why they raised their return forecast for the commodity index S&P GSCI to more than 10% over the next 12 months.
The index is already up about 30% since last June. And that’s a noteworthy improvement seeing as the index lost over 30% since 2014.
This rally is precisely why our natural resource expert Matt Badiali said commodities were the “must own” sector for 2018.
There’s much more upside ahead in this “sleeping giant” market, so if you’re not in commodities today, I suggest looking into them.
I hope you all have a great rest of your weekend.
Catch you next week.
Managing Editor, Banyan Hill Publishing