Is the Raw Material 'Super Cycle' Ending...? NDR Says "Technical Indicators Worsening"

[Image source=Yonhap News]

[Asia Economy Reporter Kim Hyunjung] Technical indicators of raw material prices have deteriorated, and there is a diagnosis that the previous 'supercycle' phase may be coming to an end.

On the 5th (local time), according to Business Insider (BI), Ned Davis Research (NDR) stated in a client note that "the NDR commodity model has joined the bear camp," adding, "the current indicator is at its lowest level since June 2020." They further explained, "This means inflationary pressures are easing, which is a positive signal for both bonds and stocks."

According to NDR's model, out of 19 commodities, only 7 were above their 200-day moving averages, and 3 exceeded their 50-day moving averages. Copper and crude oil have already entered a bear market. As recession concerns grow, copper prices have fallen 31% from their peak, and West Texas Intermediate (WTI) crude oil has dropped 24%. The Baltic Dry Index (BDI) has retreated more than 50% from its peak. This indicates that supply chain bottlenecks are easing.

NDR explained, "It remains to be seen whether demand will slow down enough to put the brakes on inflation." If inflation continues to rise, raw material prices could regain upward momentum, increasing the possibility of stagflation (rising prices amid economic recession) and leading to a prolonged bear market in the stock market. They added, "Evidence of a major bull market or supercycle in commodities is diminishing."