The Great Commodity Bull Market: How We Got Here & Where We're Going

In early 2020, most commodity investors braced for a pandemic-led bust. So, what caused it to boom instead?

by Nico Isaac
Updated: June 14, 2022

The more I scroll my daily news feed, the more I think: Are these "Ripley's Believe or Not" headlines?

• "Congress Holds First UFO Hearing in 50 Years" (May 17 Time Magazine)
• "Italian artist auctions off an invisible sculpture for $18,000" (June 3 Artnetnews).
• "Police chase in pursuit of speeding driver ends in rescue of alligator." (June 13 Michigan Live)

Even if they are true, I can't help harboring a few doubts.

But what about this story, from Mining.com on May 25: "Commodities in 'Perfect Storm'"

"Years of under-investment in mining of metals essential to energy transition, supply shocks and high energy prices will continue to drive commodity prices higher. Combined with covid-related logistical issues ... a commodity super cycle has now begun and will carry on for the next 30 years."

On its face this story sort of makes sense, saying: an already stressed market for natural resources was further stressed by the pandemic and now, the world is running out of raw materials and causing a spike in prices until the aliens phone home.

But if you check the record, you'll find this story has drastically changed over a very short period. To wit, when the pandemic arrived in early 2020, and oil plummeted into negative territory for the first time ever, the mainstream financial experts said supply bottlenecks, factory shutdowns, and cratering demand meant prices had their hands commoditied behind their bearish back.

Here, we recap these headlines from the time:

• April 6, 2020 Mongabay News: "As Covid-19 Spreads, Commodity Markets Rumble."
• April 13 UPI: "Coronavirus Pandemic Crashes Commodity Prices"
• April 23 World Bank Commodity Markets Outlook:

"A Shock Like No Other: Coronavirus Rattles Commodity Markets

"The global economic shock of the COVID-19 pandemic has driven most commodity prices down and is expected to result in substantially lower prices over 2020"

And, on April 27, The Economist added insult to injury:

"Oil and Commodity Prices Are Where They Were 160 Years Ago...Don't bother looking for a long-term trend; forecasting commodity prices is a mug's game"

A mug, for those unfamiliar with British slang, is an easily deceived, foolish person.

In turn, Wall Street never saw the current commodity bull market coming because their analysis projected the pandemic-driven drop in demand indefinitely into the future.

But there was another way to assess the trend in commodities at the time that looked away from the news and directly onto the price charts of the sectors' leading indexes. Here, in the March 2020 Global Market Perspective, our analysts set the stage for a dramatic reversal in the Bloomberg Commodity Index; the difference was, this one pointed up.

"The commodity index has fallen below the end of wave (3) down in an impulsive manner, fulfilling the minimum requirements to complete wave (5) of C down.

"If the index were to rally back to their January 2020 highs, we would consider bullish scenarios for the entire EM/commodities complex."

After bottoming in April, the Bloomberg index began to rally. Then, in the September 2020 Global Market Perspective, our analysts confirmed the broad change in trend:

"Now that the Bloomberg commodity index has completed a three-wave decline from 2008 and then advanced impulsively from its 2020 low, we can say that commodities overall have also ended their secular bear market from 2008."

Next, in the December 2020 Global Market Perspective, we moved our focus to the bellwether Invesco DB Commodity Index Tracking Fund to provide clarity into the future of the sector as a whole:

"(NYSE: DBC) is advancing in third-of-a-third wave in the early stages of long-term bull market."

A year later, the DBC had rallied 40%-plus before losing some steam. Then, in the December 2021 Global Market Perspective, our analysis identified the decline as a wave (2) down and set the "minimum target" for its end at "just below 18."

In the January 2022 Global Market Perspective, we confirmed the end of wave 2, and the start of a third wave advance.

From there, DBC powered higher in classic third wave fashion. In the May 2022 Global Market Perspective, our analysts labeled a completed wave (4) triangle and start of a new, fifth wave rally:

"The advance could continue a while".

On June 9, wave 5 rose to 30.54 before taking a breather.

Now, the June 2020 Global Market Perspective puts the Elliott wave lens on two leading fuel and food commodity charts -- US Gas Fund and wheat, and of course, the DBC! The wave pattern unfolding in all three charts support the idea that one scenario is fast approaching.

In the end, the truth about where the world's leading financial markets are headed won't be in the news; it reveals itself directly on the price charts.

Find out the story unfolding on those charts with our complete, Global Market Perspective!