Why Commodities are about to Enter a New Supercycle

Commodities are entering the early stages of a new, potentially multi-year supercycle because their relative valuation is unusually low while inflation, energy-transition demand, geopolitics and rising living standards strengthen the outlook.

• Over roughly 125 years, equity and commodity supercycles have alternated, with relative prices reaching extremes before subsequently reversing.
• The S&P GSCI-to-S&P 500 ratio has fallen to its lowest level in more than 50 years, while commodities are close to their cheapest relative valuation since 1900; the author argues equities have been in a supercycle since the Global Financial Crisis.
• Over the past five years, gold and oil have performed considerably better than equities, challenging the idea that commodities have broadly underperformed.
• The author identifies five drivers: the valuation gap, the return of inflation, metals demand from the green transition, rising geopolitical risk and higher global living standards.
• U.S. policy under Donald Trump is presented as potentially inflationary because of AI-related capital expenditure, energy-grid investment, supply-side shocks, higher capital costs and rising public debt; the author compares the current inflation pattern with 1966–1978 and warns of a possible 1970s-style stagflationary outcome.

Takeaway: Investors seeking sustained double-digit returns should allocate a meaningful portfolio share to commodities, although the author acknowledges that history may not repeat exactly and that disinflation could return sooner than expected.