Inflation: Topping? Maybe..

The inflationary heat has faded slightly, as some commodities have moved away for the tops. Will it last? Forecasting the future is always a challenging art. Nonetheless, 50 years of inflation’s history show some repetitive behaviour that could help better understand the actual situation. Let us see how.

Since 1950, the CRB commodity index (it averages a basket of 19 commodities) had two inflationary cycles. One has topped in 1951, while the other finished in 1980 (29 years time span). From bottom to top, the uptrend of the last inflationary period has continued for about 12 years (1968-1980) and the steam has run for 65% (top/bottom). The periods of consolidation (1951-1968, 1980-2002) have continued for about 20 years. During these phases, the index topped and bottomed roughly every 4/5 years.

How this could be applied to today markets? The last uptrend in commodities started in 2002 and topped for the first time in 2008 (50%). A new move initiated in 2008 and is still on (44% top to bottom).  As a result, a pick might be closer, if 4/5 years  top to top distance is taken into consideration.

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