Chinese economic growth beat expectations and we remain optimistic for the outlook of 2021. Cyclical commodities will still do well on strong growth prospects. Our US economist has substantially upgraded the US growth outlook for the coming years. Less strict lockdowns and large government stimulus will result in the quicker closing of the output gap. These are positives for the outlook for commodities. But other dynamics are less supportive for the outlook for commodities:
First, we now expect slightly higher US nominal and real rates compared to lower rates a few months ago.
Second, we no longer expect the Fed to be on hold for the next five to seven years. We think the Fed will start tapering in 2022. A less dovish Fed policy is also a headwind for commodity prices
Last but not least we think that the dollar has bottomed for now. This will be a head wind.Monthly-Commodity-Insights-Jan_2021-1.pdf (893 KB)