Samuel Pelaez: Commodities Are The Cheapest they have Ever Been Compared to the S&P
Samuel discusses a chart that compares the S&P 500 with the commodity market. It suggests that commodities are as cheap as they have ever been in history. If you sold one unit of your market exposure today, you could buy the largest amount of commodities ever.
The chart goes back sixty years and shows that there have only been two other opportunities (1970 & 2000) where things have been nearly as extreme as today. The chart suggests that we are on the verge of another bull market that could run for as long as a decade. Investors should be gradually rotating their gains into the commodity sector.
This year has been a challenging year for resources; recent trade wars and tariffs are likely all part of a negotiation tactic that will be short lived.
China is working on a significant infrastructure project called the One Belt One Road where they are industrializing two dozen countries into a modern Silk Road. Much of the world is developing, and the demand for commodities remains strong. He feels that right now is a good time for all commodities and energy.
This year has been disappointing for gold, and the biggest reason has been the strong dollar. However, inflation is creeping in and showing up in energy and fuel prices. He feels that this will stall the dollar and gold will pick up.
Samuel describes Galileo Global Equity Funds and how they manage them to avoid risk while still looking for outsized opportunities in the commodity sector.
Talking Points From This Weeks Episode
• Commodity market compared to S&P 500 is at historic lows.
• Trade wars are likely to be short-lived.
• Much of the world continues to industrialize, and commodity demand remains high.
• The dollar is expected to lose steam as inflation increases, and gold should pick up.
Samuel Pelaez is Chief Investment Officer and portfolio manager at Galileo Global Equity Advisors. He joined Galileo in 2015 and previously served as an Investment Analyst at US Global Investors, a boutique U.S. based investment management firm. Mr. Pelaez graduated from the Schulich School of Business with Distinction in 2012. He also holds a Masters in Finance degree from The University of Cambridge. Samuel is a CFA charter holder and member of the Toronto CFA Society.
Mr. Pelaez is the portfolio manager for the Galileo Growth and Income Fund. He also manages the Galileo Technology and Blockchain Fund, which is available to accredited investors in Canada.