Note: this is a new series for free subscribers to give an insight into my work at Topdown Charts (+deliver some useful and timely takeaways!)
Chart: Commodities & Global Growth
Despite all that’s gone on this year we have actually seen quite a significant reacceleration in the global economy. Notably this has been particularly pronounced in the real-world cyclical parts of the economy (manufacturing, trade, fixed asset investment).
That’s important because it’s those sectors that have the most direct impact on commodity prices. And it’s among the reasons (including geopolitics and supply constraints) we’ve seen such enduring and broad-based strength in commodities this year.
It’s also been a key driver of upward pressure on inflation, and along with stronger growth has contributed to the global policy pivot to interest rate hikes that is currently underway (with the Fed likely joining the pivot party soon).
This speaks to the highly cyclical nature of commodities.
And that’s why I always recommend keeping an eye on commodities —not just because they can be a highly useful hedge against inflation +source of alpha/absolute returns,
…but also because they give us important information about the stage of the cycle and associated macro risk backdrop.
As for the next steps in this chart, my best guess is both commodities and global growth have a window for continued strength, but that window likely closes into mid-2027 as tailwinds turn to headwinds.
Commodities vs Global Growth — What do you think?
(what do you think is the most likely combination over the next 6-12months?)
p.s. Yes, in case you were wondering: the above survey basically covers the 4 major macro regimes (Reflation/Overheating = commodities up, growth up; Stagflation = commodities up, growth down; Goldilocks = commodities down, growth up; Deflation = both down).
Weekly Report Notes
Here’s the topics & takeaways from my latest report —it should give a good sense of what I tend to cover in the Topdown Pro service as well as providing some high-level insights into how I am currently seeing Macro & Markets:
1. Global ex-US Equities: remain bullish global ex-US equities (on an absolute and relative basis) given cheap valuations, bullish technicals, and supportive macro-fundamentals.
2. US Small Caps: remain bullish on US small caps given cheap valuations (vs history, vs large caps, vs bonds), supportive macro-fundamentals, contrarian bullish sentiment/positioning, bullish technicals.
3. GSV vs ULG: relative value favors Global/Small/Value vs US/Large/Growth, and there are tentative signs of a technical turning point overall [monitoring this theme for risks + opportunities].
4. Commodities: commodities are gaining a second wind after what now looks like a classic bull market correction, clear scope for further upside (macro, technicals, sentiment).
5. Agri Commodities: continue to see upside risk in agri commodities (as a group) given cheap valuations, light capex, improving sentiment, weather risk (El Nino), and bullish technicals.
Thanks for reading! Reply to this email if you have any questions.
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Best wishes,
Callum Thomas
Head of Research at Topdown Charts
Connect: LinkedIn | Twitter/X | Substack
p.s. What do you reckon?
Please provide feedback below (reply by email if you had any specific points)
Also, in case you missed it: be sure to check out the previous note — in this post you will find more macro market musings + thoughts/charts on the Fed [and last week’s survey results!!]
![[Chart] Fed is a Go](https://substackcdn.com/image/fetch/$s_!aTCN!,w_1300,h_650,c_fill,f_webp,q_auto:good,fl_progressive:steep,g_auto/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fc79e0f0e-93eb-4064-aa5e-cebb041de2f1_1150x785.png)
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