Key Points

  • While the global natural resources markets continue to be volatile, we believe a multi-year commodities cycle is in the early stages.
  • In our view, natural resources remain one of the best sources of alpha, diversification, inflation protection and dividend-yield generation.
  • We believe that nimble, active managers with courage in their convictions will be well positioned to find the best opportunities across and within select commodities. 

“Everyone has a plan until they get punched in the mouth.” – Mike Tyson

Ours is not the first outlook to reference Mike Tyson’s famous quote, nor is it likely to be the last. We think the sentiment expressed is ‘on the nose,’ since the commodity markets have successfully delivered a few blows to investors over the last decade, leaving them a bit dazed and unsure of how, where, or even if, to invest in this space. Looking toward 2024, we feel it is important to have a plan, but even more important to have a process in place to absorb, or even dodge, the inevitable knocks might arise. To that end, we believe we are still in the early rounds of the current commodity bull market—cyclical and secular forces remain supportive and have room for further growth before the final bell rings. We believe that active managers that have both the ability to ‘bob and weave’ high conviction should be well positioned to find the best opportunities across and within select commodities. 

Standing Our Ground

One year ago, we highlighted three main drivers that we believed would be the key factors leading this multi-year commodity bull market:

  1. Cyclical global economic recovery and normalization following the Covid-19 pandemic combined with China’s reopening would support demand.
  2. Slowing investment in natural-resource infrastructure and growth projects over the last decade, particularly among US producers, would limit supply response.
  3. Decarbonization and energy transition would drive demand among traditional commodities while also limiting new supply.

Throughout 2023, we saw evidence that our thesis is still intact and should continue into 2024. While China’s broad economic recovery can be characterized as ‘uneven,’ under the surface there was growth in both demand and imports for metals such as copper and aluminum, both of which are trending above their ten-year averages. Company management teams continue to be more disciplined with their capital spending plans—placing more emphasis on balance-sheet health and returning capital to shareholders as opposed to leveraging each incremental dollar into future production growth, especially among US energy companies. Finally, investors sought exposure to commodities that were linked to energy transition, such as uranium for nuclear power, and copper and lithium for batteries and electronic vehicles, to name just a few.

We also noted at the outset of this year that the early stages of commodity bull markets are often periods of heightened volatility as investors await confirmation that the investment opportunity is real and not just a cyclical, short-term event. We expect the volatility to continue into 2024, especially as the global economy faces potential growth headwinds which could raise questions around demand. 

In short, we remain highly convicted in the natural-resources opportunity set and think that the supply/demand environment should be tight in the coming years. Inflation, while moderated off peak levels, continues to permeate the global economy, and the supply response could take some time to alleviate these pressures. We believe the rise of environmental, social and governance (ESG) matters should continue to distort price signals to commodity producers, thereby exacerbating supply shortfalls. We also think that slowing economic growth has largely been discounted into commodity prices and any impact to demand for energy and metals should be relatively moderate. Our investment process and philosophy remain unchanged as we continue to seek investments in areas where the commodity macroeconomics and company-specific factors are aligned. In our view, this sector remains one of the best sources of alpha, diversification, inflation protection and dividend-yield generation.


Our long-term secular view on the agriculture sector remains favorable as we think food security and scarcity are likely to be important topics in the coming years. However, we believe timing is important given how much seasonality can affect shorter-term stock-price movement. We also like the sector because agriculture and food demand tend to be more resilient during the peaks and valleys of economic cycles. Regardless of the pace or direction of monetary policy worldwide, the global population continues to grow, and likewise food demand should continue to increase unabatedly. However, unstable growing conditions across various parts of the world could impede production.

A look back at historical corn yields provides a depiction of potential changes in food production. Corn—a component in many food and industrial products and a key ingredient in livestock feed—is the most produced feed grain in the US. Corn production rose substantially from the 1970s through the early 2000s, with the number of bushels per harvested acre doubling from 80 to over 170. However, corn yields have plateaued at these levels since 2014.[1] There is also a considerable risk of future volume disruptions from the Black Sea region, as the war between Russia and Ukraine continues into its third year. This conflict could also potentially affect select inputs needed in the agricultural sector, such as natural gas to produce nitrogen fertilizer and potash. Weather continues to be volatile globally, and we believe that climate change should be a structural driver for the agriculture sector. We remain cautious on forest products as there is sufficient spare capacity to meet any increases in demand.


We believe the fundamentally tight supply/demand dynamic within energy should continue in the coming year. For an accurate representation of the energy market, it is necessary to separate hearsay from reputable research and data. According to fundamental analysis, US demand for energy commodities (particularly for gasoline and distillates) is hovering near its five to ten-year average. Data from China also contradicts the downbeat market narrative, as Chinese import numbers remain near historical averages.

The current oil cycle is supply-driven as demand has recovered and normalized from the drop spurred by the Covid-19 pandemic. Oil supply, however, continues to raise concerns. The Organization of the Petroleum Exporting Countries has worked effectively to regulate supply and seeks to remain in control as Russian production is expected to fade soon and the US runs out of core, tier-one acreage in US shale. In our view, this should support global oil prices. We continue to believe there are attractive opportunities in companies with high-quality management teams that control top-tier energy assets, as well as areas like oilfield services where near-full-capacity utilization has translated into positive earnings revisions.

Natural Gas

Natural gas remains an appealing area of investment, in our view. While prices have historically been guided more by inventories and seasonal factors like weather, we think cyclical and secular drivers should be more prominent in the future. Similar to oil companies, management teams at these companies are prioritizing balance-sheet discipline over production growth, which should limit capital expenditures and new supply coming online. While the price spikes that occurred over 2022 were likely to have been outliers, we appear to be in a ‘stronger for longer’ environment. We believe natural gas should also continue to gain recognition as an important bridge fuel for a decarbonizing world.

Metals and Mining

We continue to have an optimistic, yet selective, view on the metals and mining space. Concerns about global economic growth and mixed Chinese economic data have weighed on investor sentiment this year and are likely to persist until confidence in the demand outlook returns. We would note that these periods of skepticism typically provide good entry points. We would also note that in previous recessionary cycles, there have typically been sizeable inventory buildups and an overabundance of supply. However, during the current cycle, physical inventories across the metals sector have remained constrained owing to production headwinds.

Select metals and materials have more upside leverage, both cyclically and structurally, and we continue to be most constructive in our outlook for copper. Major producers, such as Chile, have experienced persistent production setbacks in recent years, and supply has struggled to meet demand. Structurally, copper ore grade has fallen steadily over the last 20 years. We also maintain our positive outlook for uranium. As nuclear power gains further acceptance as a critical fuel in the path to zero emissions, we believe uranium could still be in the relatively early stages of an upward trend. Furthermore, after more than a decade of power reactor closures following Japan’s Fukushima disaster, global utilities and governments are again recognizing the advantages of nuclear power and delaying plant retirements. However, as the supply side has been in a bear market for the last decade, close to 30% of annual refined uranium today is derived from secondary supplies controlled largely by Russia. As global utilities draw down their inventories, we believe a procurement cycle will follow, which should drive prices higher.

Gold and Precious Metals

In the near term, we believe the price direction of gold and precious metals should largely be determined by inflation expectations and whether recent geopolitical events escalate. Over the longer term, we continue to value exposure to gold and precious metals for diversification benefits, especially in periods of heightened economic, financial market and geopolitical volatility. While not our current base case, in our view gold and precious metals have the potential to provide defensive exposure in the event of a negative global economic shock and an abrupt reversal in central bank policy. Through all periods, we believe selectivity in the space is key to identifying the best investment opportunities. We choose to invest in companies with high-quality assets, efficient operating models, fundamentally robust balance sheets and attractive, shareholder-friendly capital return programs.

Energy Transition

We continue to favor energy-transition and view the sector as very attractive from a stock-picking and thematic perspective. We will invest selecticely, when appropriate, in utilities/developers, equipment manufacturers and grid integrators, as well as in energy-transition materials. We believe this sector should continue to be a substantial source of alpha and return generation when the opportunities and valuations are appropriate.

From a secular perspective, the global push toward decarbonization should drive a significant generational shift in the demand for copper—akin to, and perhaps even greater than, the emergence of Chinese demand in the early 2000s. Additionally, with the emergence of this new structural demand, we believe we are at the cusp of a capital-expenditure super cycle, and that companies that provide the equipment and services, such as engineering and construction, could benefit over the coming years.

More Room to Run

Commodity cycles rarely last only two years; typical cycles last five to ten years, as this time frame allows for physical supply to develop and correct any supply/demand imbalances. The consensus continues, in our view, to overestimate how elastic commodity demand can be during economic cycles. Demand may soften during a recession, but often this response sets off a ‘coiled-spring’ effect. As we have seen in previous downturns—even one as severe as the global financial crisis—demand for commodities recovers rapidly when economic conditions normalize. Supply, however, may be increasingly constrained as capital investments tend to be deferred during times of economic uncertainty. While the global natural resources markets continue to be volatile, we believe we are in the midst of a multi-year commodities cycle, with themes such as decarbonization extending the investment time frames of these diverse assets, increasing their upside potential.

1. Source: Unites States Department of Agriculture’s National Agricultural Statistics Service.


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