Back in 2021-22 a lot of folk were talking up the Supercycle narrative, and for some very good reasons e.g. prolonged underinvestment in supply by commodity producers, structural and thematic drivers of demand such as the energy transition, but also short-term factors like the stimulus-fueled surge in growth, and let’s face it a key driver of supercycle-narratives was just plain fizzy bullish sentiment.
Aside from the reset in valuations, I’ve also noticed a material reset in sentiment, positioning, and allocations: the mood is bearish-to-skeptical now, and a stark contrast to crowded longs and consensus bullishness around the peak of the supercycle-sensation back in 2022. When commodity markets are expensive, producers respond by increasing supply and consumers feel the pinch and often demand softens prices therefore subsequently decline as supply rises + demand falls.