The re-election of Donald Trump to the US presidency was one development in the fourth quarter of 2024 that was particularly noteworthy. RCF does not comment on political events; however, the organization must understand how the world has changed and thoughtfully consider what it means for both existing and new investments. Recognizing the change in US leadership, but equally recognizing most commodities are consumed ex-USA, Q4 2024 sets the stage for what will come next.
To understand the global picture, a logical starting point is to consider the performance of the global mining sector within the context of the broader global equity market basket. RCF spent some time considering which index best represents each market, as highlighted below:
- RCF market -> MSCI World Metals & Mining, ticker: MXWO0MM Index
- World market -> MSCI All Country (ACWI) Index, ticker: MXWD Index
While no index is perfect, the ratio of these two indices does provide a perspective of whether investment is flowing into or retreating from the metals & mining sector (numerator) relative to the whole of global equities (denominator).
Figure 1: Global Mining vs. Global Equity Market (index ratio)
The chart above shows the metals & mining sector currently sitting at one of its lowest ratio levels (relative to the global equity basket) in the past 30 years, specifically at a ratio of 0.36 as of 31 Dec 2024. This compares with an average of:
- 0.48 average ratio since 2015 (10-year average), or
- 0.71 average ratio since 1995 (30-year average)
From such a low relative ratio, there is asymmetrical upside value in metals & mining should markets revert to the mean. For investors looking to either reallocate or increase their exposure to the metals & mining sector, the current investment environment provides an attractive entry point.
Secondly, metals & mining equities have broadly matched the performance of the global equity basket over the past 10 years. The ratio has been broadly flat since 2015. Underneath the ratio calculation, both indices have risen over the past 10 years, so investors haven’t necessarily lost any ground to the global equity basket with a metals & mining allocation.
Finally, with inflation starting to pick back up and with all signs that Trump is serious about bringing investment back into the US market, metals and mining investments are an energy-agnostic way to position a portfolio for what Trump is planning, or indeed what other countries around the world need to grow their economies.
Figure 2: Global Primary Energy growth since 1970
Source: 2024 Energy Institute Statistical Review of World Energy, RCF Analysis, December 2024No matter which energy source is favoured in the future, growth in all six forms of primary energy depend on metals & mining.
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Forward-looking statements are presented for illustrative purposes only and are not guarantees of future performance. Actual performance will vary due to a variety of factors, including general economic conditions. Neither RCF nor any independent third party has independently audited or verified this information.
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