The Inflation Trade Is Heating Up

For years, commodities have lived in the shadow of stocks. 

Capital chased growth, innovation, and financial assets while real assets were left for dead. 

But markets have a way of reminding investors when something important is changing.

And that's what's happening right now.

Metals and mining are no longer just going up in absolute terms; they’re dramatically outperforming stocks. 

Not just any stocks, but Papa Dow himself. 

When a pro-cyclical, economically sensitive group like metals and mining starts ripping relative to the world’s most important equity index, it’s a message from Mr. Market.

The SPDR Metals & Mining ETF $XME is now trading at its highest level versus the Dow Jones Industrial Average since 2014. That’s more than a decade of relative underperformance being unwound in a matter of months. 

This is what a regime shift looks like in real time.

There's an old saying that Copper is the metal with a PhD in economics, hence the name Dr. Copper.

And while it sounds cute, the logic is deadly serious. 

When Copper, base metals, and mining stocks are leading, it tells us demand is real, economic activity is expanding, and capital is flowing toward the parts of the market that benefit most from growth and inflation.

That’s precisely what we’re seeing now.

Metals and mining are breaking out in absolute terms and outperforming their alternatives. 

That combination tells us investors are rotating into cyclical assets and betting that economic expansion has more runway ahead.

And that matters for more than just metals.

Commodities, broadly speaking, are inflationary assets. 

When demand rises, prices follow. 

And here’s the thing most people miss: inflation is a choice for the investor class. You don’t have to suffer from it. 

As asset allocators, we can choose to profit from it.

That’s where inflation beneficiaries come into play.

The Horizon Kinetics Inflation Beneficiaries ETF $INFL offers a clean, diversified way to express this theme. The fund is heavily tilted toward areas that historically benefit most from inflationary environments.

It's roughly 30% energy, 27% financials, and about 25% materials.

And the price put in a major base breakout this week.

After years of carving out an accumulation pattern, the ETF is ripping to fresh all-time highs. We think it has more room to run.

We want to own INFL above 45.75, with a target of 52 over the coming 3-6 months.

What are you seeing in commodities? Let us know what you think. We love hearing from you!

Commodities Trades of the Week

For those who want even more juice, our Commodities Trades of the Week digs into two individual names with some of the best bases in pro-cyclical corners of the market.

Premium members can see the entry and target levels below. 👇