June 2017

Multiple years of commodities weakness, on the back of a strong dollar, are showing solid signs of 2H reversal. Crude oil's dip to 20% below 2017's high was declared a bear market – it should feed the bulls. Led by a late-June rally in copper, metals appear to be gaining confidence in the potential for a longer-term dollar peak, supported by multiyear highs in demand vs. supply. Agriculture and livestock may be heading into a perfect storm for higher prices supported by record U.S. exports. Bloomberg Commodity Index demand vs. supply indicates early recovery, similar to after the financial crisis but with a foundation of prolonged price declines. Stock and bond highs may shift some attention to lowly commodities. The reflation story has little tolerance for more commodity weakness.