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May 03 - 02:55 PM

HSBC: Here Are The Latest From Our Commodity Cycle Model

By eFXdata  —  May 03 - 01:30 PM

Synopsis:

HSBC's proprietary commodity cycle model, COCCLES, indicates that the commodity market is currently in a "Weak Bull" phase. This stage, characterized by moderate upward momentum, is likely to persist based on historical trends and the model's current outputs.

Key Points:

  • Model Insights: COCCLES assesses the probability of various commodity market cycles. The transition to a Weak Bull phase has been confirmed over the past month, suggesting sustained but moderate growth in commodity prices.

  • Cycle Duration: Historical data from COCCLES suggest that Weak Bull phases typically last at least six months. This indicates that the current cycle could continue to influence market conditions well into the future.

  • Current Probabilities: Although the confidence in the Weak Bull cycle has slightly decreased from near 100% to approximately 90%, this level of probability is still strong and aligns with previous periods where the cycle has maintained its influence over an extended time.

  • "We expect this Weak Bull phase to continue. First, from a modelling point of view there are a broad array of drivers pushing the probability of a Weak Bull cycle higher...Second, from a fundamental point of view we see signs that the global growth cycle has troughed and that commodity supply generally remains tight.," HSBC notes.

Conclusion:

The insights from HSBC's COCCLES model provide valuable foresight into the commodity markets, suggesting a continuation of the Weak Bull phase. 

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Source:
HSBC Research/Market Commentary

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