Easiest Buys to Join Massive Bull Market Signaled by Commodities
As a range of factors combine to push commodities higher, here are the easiest ways to gain exposure to the potential gains.
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Sometimes, I like to put on the hat of a pure technical analyst. The reason? Supply and demand of prices alone can be an incredibly powerful way to forecast market movements. While not perfect, the simplest technical analysis tools like trendlines, support and resistance levels and psychologically-driven patterns can be a game changer because it leads you to areas you may not be thinking about.
Right now, commodities continue to catch my eye, signaling the potential for a massive bull market that we haven’t seen in years.
The Long-Term Charts Tell a Compelling Story
Long-term charts are telling a compelling story. Precious metals bottomed out in December 2015, kicking off a sustained upward trend. Agricultural commodities are now forming saucer-like patterns, hinting at the start of a long-term uptrend. On the macro side, factors like de-globalization, poor crop yields and a push toward healthier, more organic food production are tightening supply further. These constraints, coupled with rising population growth, create a perfect setup for significant price increases across the commodity space.
The Money-Printer Will Keep Running on Overtime
Even with efforts to curb spending, our high debt burden and relentless money printing make it difficult to slow the pace of monetary expansion. More dollars chasing fewer goods is a recipe for inflation, which tends to favor commodities. For traders, this dynamic strengthens the case for higher prices in this sector and sets the stage for a significant up-cycle.
Some of These Might Be the Next Best Thing to Futures
There are multiple ways to capitalize on this opportunity.
For agricultural exposure, the Invesco DB Agricultural Fund DBA is worth considering. The Invesco DB Energy Fund DBE, Invesco DB Base Metals Fund DBB and Invesco DB Precious Metals Fund DBP also offer focused opportunities within specific commodity groups.
You might take a smaller position in the volatility iShares Bitcoin Trust ETF IBIT, often referred to as a “digital commodity,” which may also serve as a diversification play. Additionally, managed futures funds or ETFs can provide trend-following exposure, which tends to perform well in volatile stock markets.
Although managed futures funds look like sleepers recently in the midst of a strong stock market, they have a tendency to move higher when you least expect it. I don't like to invest with a rear-view mirror. I hope to see where the hockey puck is going, not where it's been. These are volatility instruments that you might hate during a bullish stock market, but love them after it's too late and they've already moved higher.
Here Are Easy Ways to Gain Exposure
Managed futures deserve a closer look. These funds are often trend-following in nature, thriving in periods of heightened volatility. When markets become rough, managed futures funds typically perform well — sometimes dramatically so. They are an excellent option for traders seeking diversification and the potential for strong returns during challenging market conditions.
One way to get exposed to this group without signing a lot of paperwork and getting into private funds is to invest in publicly-traded ETFs that employ managed futures strategies. A few of my favorites are the iMGP DBi Managed Futures Strategy ETF DBMF, KransShares Mount Lucas Manage4d Futures Ix St ETF KMLM and Simplify Managed Futures Strategy ETF CTA.
Since these managers are systematic traders using different parameter sets, I like to diversify among them. While their strategies are similar and often focus on the same markets, their trend-following time frames, entry and exit parameters, and sector exposures vary. This diversification helps balance the nuances of their approaches and reduces reliance on a single methodology.
Bottom Line: You Can't Ignore Commodities Right Now
With mounting geopolitical risks and macroeconomic uncertainties, commodities appear poised for sustained growth. As a pure technical analyst, when I strip away the fundamentals and look only at the charts, I can’t help but lean bullish on the sector.
For traders, the message is clear: This is not a space to ignore. Whether through ETFs, managed futures or targeted sector strategies, commodities offer significant opportunities in today’s market.
At the time of publication, Llanes had no positions in any securities mentioned, although positions can change at anytime.
