November 2023 - Macro Commodity Outlook
Our commodity-related macro framework for the month - All the macro fundamentals that investors with commodity exposure need to know
Something has changed on the economic front.
As we wrote since the beginning of the year, we viewed that the data indicated that the “can will probably be kicked down the road” a bit further. But things have started to shift and we see early warning signs that make us think that economic momentum will start to disappoint again from here onwards.
Additionally, we currently view gold and crude oil as two markets that still have a large “war-premium” priced in due to the conflict in Israel. Especially oil should lose some more momentum over the coming weeks if our thesis of slowing economic momentum toward the beginning of 2024 becomes evident.
We continue to balance trades on the long and short side in the commodity markets. We profited last month from the renewed strength in the soybean meal market and made good profits with crude oil on the long and short side. A market that gave us a good headache was once again sugar in which our market timing remains a bit off in 2023.
Our Kuemmerle Report portfolio is at the end of October up 53,7% YTD (+6,4 percentage points MoM) while the CRB index is currently up 2,6% YTD. (+0,2 perecentage pints MoM)
Our win rate continues to be steady at 62%, our average winning trade on a $100.000 portfolio from the start of the year sits at $2.617, while the average losing trade sits at $1.634. With a risk free rate of 5% the Sharpe Ratio for the portfolio is 3,26 at the end of October.
Please find the models that build our current thesis below:
As always, please keep in mind that for our system it’s relevant where growth is headed over the next 1 to 3 months and not longer. While people speculate over the likelihood of a recession, for us the rate of change of economic momentum is much more important than when or if a recession is imminent.