Michael Singleton: Commodities are Showing the True Inflation Stats

Tom welcomes back Mike Singleton, Senior Analyst and Founder at Invictus Research to the show. Mike explains his views on the business cycle, current economic trends, and their impact on asset classes like stocks, bonds, commodities, and currencies. Mike explains that Invictus defines the business cycle as having three sub-cycles: real growth, inflation, and monetary policy. They believe these cycles drive price action across various assets. The US economy is currently reflating, indicating faster real growth and inflation. Despite inflationary pressures, federal deficits are expected to fuel manufacturing growth due to initiatives like the Inflation Reduction Act and CHIPS Act.

Mike argues that investors can benefit from an inflationary cycle as it leads to potential growth in earnings. However, consumers may face challenges with rising prices, affecting their quality of life and ability to deploy capital into markets. Mike believes that for a clearer understanding of inflation, one should look at commodity prices rather than Consumer Price Index (CPI).

Mike also discusses the significance of copper miners' performance as an indicator of real economic acceleration. He suggests considering ownership of productive assets and taking on more cyclical risk when copper miners outperform copper. Oil, as an energy input, follows this trend, with demand increasing during economic expansion. Despite a recent downturn, it is viewed as a buying opportunity.

The US dollar's relationship with economic data, interest rates, and the Fed is also discussed. While the U.S. economy is outperforming other developed markets, the dollar could strengthen based on interest rate parity. However, its weakening against emerging market currencies due to their improved economic conditions is generally bullish for reflationary assets like commodities and risky investments. Invictus has launched a new mobile app with an AI-enabled chatbot providing retail investors with access to research analysis.

Time Stamp References:
0:00 - Introduction
0:33 - Three Economic Cycles
4:43 - Housing Sector Health
7:08 - Consumer Spending & Deficits
16:33 - CPI Metrics & Adjustments
18:02 - Income, Wages, & Demand
20:14 - Fed, CPI, Yields, Cuts
26:05 - Commodity Demand
30:46 - Metal Prices Vs. Miners
32:10 - Oil Market Outlook
35:23 - Strategies with Miners
38:36 - Positioning & Cash
40:10 - Investors Vs. Consumers
41:25 - Wrap Up

Talking Points From This Episode
- How the business cycle's sub-cycles (real growth, inflation, monetary policy) influence asset price action.
- Copper miners' outperformance signals real economic acceleration; consider productive assets and cyclical risk.
- A stronger US dollar based on interest rate parity could benefit reflationary assets like commodities.

Guest Links:
Website: https://invictus-research.com/
Twitter: https://twitter.com/InvictusMacro

Michael Singleton is Senior Analyst at Invictus. He studied finance and theology at the University of Notre Dame, where he graduated summa cum laude. After graduating, he worked for several years with Broad Run Investment Management. There he spent most of my time conducting deep, fundamental diligence on the highest quality companies. That grounding gained him a thorough, bottom-up approach to research and has proven invaluable.

Since then, his focus has been spent studying the economy at-large and its relationship with liquid asset markets. There is a massive hole in the anlysis market for timely, thoughtful, and accessible macroeconomic research. That's why he became involved at Invictus.