December 2022 - State of The Commodity Market
Our commodity related macro framework for the month - All the macro fundamentals that investors with commodity exposure need to know
The main topic in the market switched from tight commodity supplies to when we will enter a recession over the last three months. This recession scenario certainly provides a lot of downside pressure on commodity prices right now. In The Kuemmerle Report, we warned you about falling commodity prices basically since the end of August. The current selloff in commodity prices is easy to explain as it directly correlates with the loss of economic momentum. As the fundamental story and tightness of these individual markets haven't changed a bit, this is also a great time to accumulate money and wait until economic momentum returns.
Our base case scenario remains that the broad commodity market will stay under pressure for some additional time and that we will see a bullish turning point somewhere in Q2 of 2023.
Here is why:
The current market story: Macro > Micro
We still think that the cyclical commodity bull market isn't over. Still, we must acknowledge that the current environment favors lower commodity prices and nothing else.