An Explosion in Demand The last commodity supercycle was all about demand from China. China remains part of the reviving commodities boom today as well. Over the past year, China has been building up its stock of all commodities, from agriculture, iron ore and petrochemicals to natural gas and oil. But this time, you can add the housing boom in the U.S. and the global post-COVID-19 recovery to the demand equation. Then stir in all the raw materials needed for electric vehicle batteries and electric motors, from lithium to rare earth metals. And you may have the makings of a boom like no other in recent memory. Constrained Supply Today, supply shortages are so severe that almost all commodities markets are in a deficit. Take the example of oil. Before the pandemic, the world was positively awash in "black gold." U.S. oil production peaked at 13 million barrels per day. With regulatory headwinds from the incoming Biden administration, analysts don't expect oil production to rebound to pre-pandemic levels. Less investment in future oil production means tighter oil supplies. Goldman Sachs now expects to see oil prices hit $80 a barrel in the second half of 2021. It warns of a large supply deficit this summer as vaccine rollouts accelerate. Sure, soaring prices will encourage more supply. But it can take years to get an oil well or a copper mine up and running. And with raw materials in a bear market, capital expenditures in energy companies and miners fell an unprecedented 40% in the first half of 2020. Christyan Malek, a J.P. Morgan analyst, suggests that there will be a $600 billion shortfall in capital expenditures between now and 2030. The New Boom Commodities have already rebounded from their historic lows. Here's why I expect that rebound to continue. First, structural demand for commodities is soaring. President Joe Biden has already pushed a $1.9 trillion fiscal stimulus bill through Congress. He's also proposed a $2.3 trillion infrastructure spending bill. These efforts - part of some $15 trillion in fiscal packages worldwide - will stimulate the appetite for copper, steel and oil. Second, inflation risks are rising. The one-two punch of massive government spending and central bank easing will boost commodity consumption and weaken the U.S. dollar. Inflation expectations priced into the U.S. bond market have already climbed to their highest level in eight years. Real assets like commodities tend to thrive in inflationary environments. The bottom line? Yes, tech stocks and electric vehicle stocks may be grabbing the headlines. But the return of the commodity supercycle may turn out to be the next decades' most profitable bet. Good investing, Nicholas P.S. If you're looking for vacation (and investment) ideas this summer... I'll be leading an exclusive seven-day adventure in Amsterdam, Normandy and Paris with The Oxford Club this summer. The first trip sold out so fast, our events team has opened up a second one for August 28 to September 5, 2021. Oxford Club excursions are can't-miss events. You'll discover exquisite cuisine, rich cultures and highly coveted financial insights. Along with my own investing presentations, Alexander Green will present some of his most profitable ideas. As our events team expects this second trip to sell out quickly, please secure your spot as soon as possible by reaching out to Maggie Stephens at Maggie@aesu.com. Maggie can also be reached at 800.638.7640, ext. 125, and would be happy to assist with your international flight arrangements. | 
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