Norbury Partners

“WE ARE VERY BULLISH ON THE WHOLE COMMODITIES COMPLEX AS IMBALANCES IN SUPPLY AND DEMAND, ALONG WITH TIGHT INVENTORY LEVELS, BRING SUPPORT AND UPSIDE RISK TO PRICES.”

DECIO NASCIMENTO

FOUNDER & CHIEF INVESTMENT OFFICER, NORBURY PARTNERS

The unprecedented global coordinated response to the pandemic in mid-2020 will be much more acutely felt in 2022 when the Covid mobility crisis eases, and there is enough time for the transmission mechanisms in the economy to work.

We expect that rates will be higher around the world, especially in developed markets. However, we don’t expect the real rates differential to be large enough versus emerging markets to keep the USD supported, and we see broad weakness in the currency for next year.

We are very bullish on the whole commodities complex as imbalances in supply and demand, along with tight inventory levels, bring support and upside risk to prices.

Lastly, equities and credit are very expensive overall. We find compelling investments only when taking idiosyncratic risk in these markets.

Altogether, we expect to see good global growth and inflation running above pre-pandemic levels next year, while commodity supply and demand fundamentals become increasingly more important as the world strives for net-zero in the face of a decade of underinvestment.

From a geopolitical perspective, two themes we are watching closely are: (1) the standoff between Russia and Ukraine, which could possibly lead to sanctions and the banning of Nord Stream 2, a key natural gas pipeline to Western Europe where gas prices have led to increased coal demand and higher prices for emission credits, and (2) how China wrestles with strained diplomatic ties with the West, a failing real estate sector, and over-indebted African nations in which it owns or operates a myriad of rare earth mines, ports, and other infrastructure that will be essential for the entire world to meet its netzero goals.