Across Wall Street, from Barclays and UBS to HSBC, JPMorgan and Goldman Sachs, a common view is taking shape: physical scarcity is emerging across multiple commodity classes, driving prices sharply higher and signaling a broader hard-asset squeeze.
Last week, UBS strategist Sagar Khandelwal issued a similar call heard across Wall Street, telling clients to “position for a commodity upcycle.”
On Saturday, Christopher LaFemina, who heads Jefferies’ global metals and mining research and is one of Wall Street’s veteran commodity experts, told clients that commodities remain historically cheap relative to US stocks.
LaFemina compared the S&P GSCI with the S&P 500, showing the ratio hovering near its lowest level in more than five decades. Similar troughs emerged during the Nifty Fifty and dot-com bubbles before commodities sharply outperformed stocks.
Previous upcycles in the ratio coincided with the 1970s oil embargo and inflation shock, the Gulf War, and the 2008 oil-price surge. Today’s depressed reading comes as retail and institutional investors remain bullish up to their eyeballs on hyperscalers and memory stocks while remaining highly concentrated in a handful of other AI names. And really, what could go wrong if the AI boom begins to deflate?
The trough in the ratio comes as traders ignore commodity markets, where the theme of scarce physical resources is rearing its ugly head:
Agricultural prices are soaring; copper is trading above $14,000 per ton in London; tungsten is above $3,000 per ton; uranium is back above $90 per pound; and many other critical materials (seen as the building blocks for the AI boom) are surging as demand accelerates. Electrification, AI buildout demand, rising power consumption, geopolitical fragmentation, including China’s weaponization of export supplies (tungsten and germanium), and years of underinvestment are colliding to create a perfect storm of constrained supplies across energy, metals, and other raw materials.
"The 10-year rolling change in the US dollar remains one of the most important macro developments in the world today," Azuria Capital's Otavio Costa wrote on X.
It's time to focus on "scarcity in the physical world," according to veteran commodities strategist Jeff Currie, who also warned, "The illusion of abundance is likely behind us."