The S&P 500’s (SPY) wobbling to the downside distracted investors from an underlying theme underway. Oil prices strengthened in recent weeks, despite the risks of a global slowdown. Even though China’s economy is worsening and hurting energy demand, oil markets are improving.
Investors looking for a hedge against inflation may position a commodity super cycle now in play. Prices for commodities could head higher. The demand for lithium in electrical vehicles will increase in the years ahead. Governments in developed nations are mandating lower emissions in gas-powered vehicles. They continue to encourage people to buy EVs, offering generous tax breaks and subsidies.
Albemarle (ALB) and Lithium Americas (LAC) are the two stocks to watch.
Stronger building activity would increase the demand for copper. Freeport-McMoRan (FCX) traded in a narrow range throughout 2023. It would break out if break out of a trading range.
Energy stocks are by far the most compelling from here. WTI and Brent crude oil futures closed higher last week. That is seven consecutive weeks of gains, a streak not seen since Feb. 2022. Lower drilling activity and limited output from refineries are creating a shortage of energy. As the cold season approaches, investors should watch energy ETFs like OIL and OIH.
