The deep and painful rout in the commodities sector is set for a reversal predicts Japan-based investment boutique, Regency Associates. The steep falls in the price of everything from crude oil to copper and aluminum to gold can be traced to the slowdown in China but also to the strength of the US dollar which remains bid as the Federal Reserve continues to threaten imminent rate hikes.

The firm says it is positioning its portfolio in anticipation of a new stimulus drive by the world’s central banks as they try to head off the specter of deflation.

“All the central banks appear committed to achieving what they perceive to be a ‘sweet spot’ inflation rate of 2%,” said Matthias Thon, who leads commodities research at Regency Associates. “They believe this will somehow ensure that demand for goods and services remains constant and that prices rise manageably but it’s a pipe dream. These things cannot be micro-managed to that extent when the world’s economies are so interdependent,” he explained.

Regency Associates is eyeing entry levels in anticipation of a bottom in prices for crude oil and copper as the likelihood of easing monetary policy in China, Japan and Europe increases. “The Fed is still maintaining that it will hike rates this year and next but we think it’s just a matter of time before they accept that doing so just as the US economy is slowing again could tip country into a recession,” added Thon.

The firm is also watching the fortunes of the large mining and energy stocks believing that a reversal in the prices of the underlying commodities will have a knock-on effect on the stocks of the companies producing them.

“Central banks provide stimulus to boost economic activity and this time will be no exception. More stimulus will boost commodity prices,” concluded Thon

About Regency Associates
When you make the decision to invest for better returns, you naturally want to make sure that your encounter with the markets is a long and prosperous affair. To achieve the former, you need to seek advice from those with a consistent record of success in securing gains for investors. In a bull market, anyone can make money but it is when the roar of the bear resonates through the world's bourses that superior investment firms like Regency Associates stand head-and-shoulders above the rest.

Contact Regency Associates:
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