Australian resource specialist investment manager, Terra Capital said today that a Donald Trump presidency could drive a significant fiscal stimulus and in turn, boost demand for metals.
Matthew Langsford, Portfolio Manager, Terra Capital said “We are maintaining our bullish position to resources. This is based on a change that occurred early this year on the back of operational and capital cost-out over a number of years and a bottoming in commodity prices.
“The repercussions of the US election result are supportive of an improving demand outlook for commodities given infrastructure spending, potential tax cuts, rising inflation etc. While the exact pathway to resources return to favour is unclear, our view is that the upwelling in some commodities was a relief rally and that is likely to continue and broaden into a wider recovery for commodities generally.
“This change is visible particularly in base metals, with gains posted in copper, nickel, aluminium, zinc, lead, and nickel over the last week.
Interestingly on the Trump victory, Richard Grace, the global head of currency strategy at the Commonwealth Bank of Australia, said the gloom in global equity markets is set to snap back in a big way.
Like Grace, we believe that global equity investors will unearth huge buying opportunities, said Langsford.
He added “Once more, coal and iron ore were the stand outs amongst a relatively weak month for industrial metals during October.
Iron ore finished October at its high (US$63.10/t) despite more obvious efforts from Chinese policy makers to slow selected housing markets down. Coal was again up with hard coking coal surging to ~A$230 (up from ~$75-80 a few months ago) and thermal coal surpassing $100, ending its five-year bear market (when prices hit as low $40).
“It was a good month for soft commodities with wheat, soy and corn all stronger – in contrast to the economically sensitive metals (copper, nickel, zinc), which were volatile but relatively flat despite the move higher in inflation expectations and bond yields.
Copper rallied to a 15-month high on the back of Trump victory.
And finally “Gold was weaker on the back of a broadly stronger US$ with spot falling 4% to US$1,272oz. Gold traded-up sharply on Wednesday (pre-election result), trading above US$1,330/oz before giving up most of its gains, as a victory speech from U.S. president-elect Donald Trump helped the dollar rebound,” he said.
About Terra Capital
Founded in 2010, Terra Capital is an Australian based specialist investment manager for sophisticated, wholesale and institutional clients. Based in Sydney, the firm has established itself as one of the best performing boutique Fund managers in the country. Terra Capital has a proven track record of performance, a focus on risk management and a management team that is strongly aligned with investors.
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