Commodities are assets benefiting from global capital diversification. Current valuations and costs for many varieties, such as energy and chemicals, may already be near the bottom range. Although short-term volatility has increased, the rigid demand driven by AI computing power expansion and energy transition, along with structural supply-demand gaps for certain commodities, has not fundamentally changed. The structural trend in commodities may not be over yet.
The macro asset strategy team suggests that decisions made after Kevin Warsh takes office may face multiple constraints, making significant balance sheet reduction unlikely in the short term. The Federal Reserve may not turn as hawkish as market fears suggest. In summary, as short-term sentiment unwinds and trading congestion eases significantly, the upward trend in related resource stocks is not over. After a short-term adjustment, a mid-term recovery is expected.
Resource stocks started the year strong but recently experienced significant volatility. In 2025, the commodity market showed clear divergence. Driven by AI computing expansion, power infrastructure demand, and geopolitical risks, precious metals and industrial metals strengthened significantly: gold and silver rose 67% and 149% for the year, respectively; LME copper and aluminum also increased by 44% and 18%, boosting the performance of the A-share nonferrous metals sector. In contrast, energy and agricultural products were weaker, with Brent crude oil and CBOT soybeans falling 18% and 3%, respectively.
In early 2026, nonferrous metals and some chemical products continued their upward trend. A-share cyclical sectors like petroleum & petrochemicals, nonferrous metals, basic chemicals, and building materials once performed strongly. However, over the past two weeks, due to high previous trading congestion and factors like the finalization of the Fed Chair nomination, precious metals, industrial metals, and related A-share sectors have seen significant volatility.
This article reviews the linkage between four past commodity upswings and A-shares over the last 20 years, briefly analyzing the transmission mechanism of commodity cycles in the A-share market.
Past commodity rallies typically stemmed from a combination of supply-demand mismatches and monetary conditions. The core logic involves global economic recovery driving rapid demand rebound, while supply-side constraints due to long-term underinvestment and lagging capacity expansion lead to temporary shortages. This fundamental pattern often coincides with loose credit cycles, a weaker US dollar, and rising inflation, attracting substantial capital inflows and amplifying commodity price gains. Beyond supply-demand and liquidity, non-fundamental factors like safe-haven demand from geopolitical conflicts or supply disruptions from extreme weather can also push commodity prices higher.
Four typical commodity cycles over the past 20 years include: 1) 2006-2008: Rapid industrialization and urbanization in China, coupled with strong domestic and external demand, drove broad commodity gains and catalyzed a cyclical stock rally in A-shares. Nonferrous metals and coal sectors achieved 200% excess returns relative to the Shanghai Composite Index; steel and building materials sectors also saw excess returns exceed 100%. Cyclical stocks peaked about 4.5 months earlier than the Nanhua Commodity Index. 2) 2009-2011: Post-financial crisis, the Fed launched quantitative easing (QE), and China introduced a massive investment plan. Global liquidity easing, combined with domestic infrastructure demand and global economic recovery, pushed commodity prices higher rapidly. A-share nonferrous metals and building materials sectors achieved over 100% excess returns relative to the Shanghai Composite Index; cyclical sectors like coal and agriculture also strengthened. Commodity stocks peaked about 3 months earlier than commodity futures. 3) 2016: This cycle had distinct "supply-side" characteristics. While global commodities rose modestly, domestic steel and coal prices surged due to supply-side reforms. A-shares generally rose震荡ly during this period, with cyclical sectors peaking almost simultaneously with commodity prices; their relative performance was not particularly outstanding. 4) 2020-2022: As the global economy recovered from the pandemic and the Fed entered a rate-cutting cycle, major commodity prices accelerated upward from April 2020, moving in tandem with A-shares. The Russia-Ukraine conflict in early 2022 triggered an energy crisis, causing energy prices to spike and further pushing up commodities. During this period, nonferrous metals and coal sectors achieved over 100% excess returns relative to the Shanghai Composite Index; however, agriculture and building materials underperformed due to weak traditional demand.
Focusing on the transmission from commodity prices to resource stocks: drivers, time lags, and elasticity. Resource stocks (coal, nonferrous metals, petroleum & petrochemicals, some chemicals, steel, etc.) are highly correlated with commodity prices, but stock prices are not a simple reflection of spot prices. Stock pricing depends on future cash flows and their discount rates. Assessing whether "rising commodity prices" translate into "rising resource stock prices" requires considering the drivers of the price increase and the profit distribution landscape.
Will resource stocks always rise with commodity prices? It depends on the nature of the price increase and the macro environment. Historical experience shows that if price increases stem from economic recovery and demand expansion, profits and risk appetite often improve together, with stock price elasticity usually exceeding that of the commodities themselves, benefiting value/cyclical sectors. When price increases come from supply-side disruptions raising costs, while demand is weak or combined with high interest rates and a strong US dollar, upstream resources and segments with cost-pass-through ability benefit relatively, while mid- and downstream industry profits may be squeezed. Market performance also depends on contemporaneous policy countermeasures; situations where "commodities rise but stocks do not rise/rise little/rise then fall" can occur.
Stocks often lead, but supply shocks can cause spot prices to lead. Historically, commodity stock rallies and peaks often preceded commodity price peaks, reflecting anticipation. For example, when commodity prices had not risen significantly but leading macroeconomic indicators (like PMI) improved, capital often positioned early, driving stock prices up first. If sudden supply shocks like geopolitical risks or extreme weather occur, spot prices may spike instantly; the stock market needs time to assess the shock's duration and profit impact, lagging behind commodity price changes.
Resource stock elasticity vs. commodity elasticity. Theoretically, due to cost rigidity, commodity price increases often translate into larger net profit growth through operating leverage (a 1% price increase leads to more than 1% profit elasticity). Combined with valuation expansion under rising expectations, resource stocks can experience a "Davis double kill," with stock price gains potentially exceeding commodity price gains. For instance, during the demand-driven booms of 2005-2007 and 2020-2022, the nonferrous metals index far outperformed gold, silver, copper, and aluminum futures.
However, recent market logic has new changes. Commodities' financialization attributes have become more significant, enhancing cross-market risk contagion. Since the turn of the century, commodity price volatility has intensified. Academic research suggests supply-demand changes alone cannot fully explain such large swings; the root cause lies in the rapid development of commodity futures markets and the influx of financial investors leading to "commodity financialization." Recent years, impacted by reshaping global trade patterns and geopolitical events like the Russia-Ukraine conflict, have frequently increased commodity market uncertainty. As financialization deepens, the correlation between commodity futures and stock returns, along with cross-market risk contagion mechanisms, has significantly increased. Pricing logic is no longer confined to supply-demand fundamentals; the influence of non-fundamental factors like geopolitical risks, supply chain security, and policies has risen notably, making commodity prices prone to high volatility under specific shocks. Taking the current cycle as an example, silver, with its strong financial attributes, showed higher price elasticity than related stocks in some phases. The recent broad decline in global commodities affected market sentiment and risk appetite, contagiously impacting global equity markets, leading to significant adjustments in the A-share nonferrous metals sector.
Are resource stocks still worth buying? Commodities are assets benefiting from global capital diversification. Current valuations and costs for many varieties, such as energy and chemicals, may already be near the bottom range. Although short-term volatility has increased, the rigid demand driven by AI computing power expansion and energy transition, along with structural supply-demand gaps for certain commodities, has not fundamentally changed. The structural trend in commodities may not be over yet.
The macro asset strategy team suggests that decisions after Kevin Warsh takes office may face multiple constraints, making significant balance sheet reduction unlikely in the short term. The Federal Reserve may not turn as hawkish as market fears suggest. In summary, as short-term sentiment unwinds and trading congestion eases significantly, the upward trend in related resource stocks is not over. After a short-term adjustment, a mid-term recovery is expected.
Regarding the market, positive factors for A-shares, such as ample liquidity, improving earnings, and catalytic industry trends, remain unchanged. Short-term volatility has begun to provide opportunities for buying on dips. In the medium to long term, the共振 of international order restructuring and China's industrial innovation trends are the core drivers pushing this market rally and the re-rating of Chinese assets. The transformative power and capital flows resulting from the restructuring of the global monetary order may far exceed the fundamental forces of a single time, country, or market. These two major conditions remain unchanged and are expected to continue supporting Chinese asset performance in 2026. With macro paradigm shifts and progress in capital market system reforms, the underlying environment for A-shares has undergone qualitative change from quantitative accumulation, making conditions more favorable for a slow bull market than before. A "steady advance" trend is expected to continue in the medium to long term.
Regarding allocation, recently suggested focus areas include: 1) High-growth sectors: After three years of rapid development, AI technology is expected to gradually enter the industrial application realization phase in 2026. Opportunities remain in optical modules and cloud computing infrastructure, potentially leaning more towards domestic directions. On the application end, focus on robotics, consumer electronics, and smart driving. Additionally, innovative drugs, energy storage, and solid-state batteries are entering their growth cycles. 2) External demand breakthroughs: Overseas expansion remains a relatively certain growth opportunity. Combining出海 trends and exposure to the US, focus on home appliances, construction machinery, commercial buses, power grid equipment, games, and globally priced resources like nonferrous metals. 3) Cyclical reversals: Based on capacity cycle positions, focus on sectors where supply-demand issues are nearing an inflection point for improvement or those with policy support, such as chemicals, aquaculture, and new energy. 4) High-quality high-dividend stocks: Inflow of medium to long-term capital is a enduring trend. Based on quality cash flow, volatility, and dividend certainty, structurally allocate to high-dividend leading companies. 5) Sectors with bright spots in annual reports: Examples include the gold sector, TMT sectors benefiting from high AI景气, and non-bank financial institutions.
For resource-related areas, based on industry analyst views, key线索 to focus on include: - Nonferrous metals: For gold, focus on companies with clear earnings release, accelerated project commissioning, or those achieving production expansion through overseas gold mine acquisitions. For copper, focus on leading players with high self-sufficiency in copper mines, strong potential for reserve growth, production increase, and external mergers and acquisitions. Also看好 the阶段性 supply contraction and price recovery in the alumina industry due to production cuts under loss pressure. In the electrolytic aluminum sector, transformation, upgrading, and cost improvements are expected to lead to re-pricing of profits and valuations. - Chemicals: Against the backdrop of limited new capacity and rapidly growing energy storage demand, focus on varieties with price elasticity potential, those at price bottoms, and reversal plays with clearer marginal supply-demand improvements. The景气 recovery in the refining chain may also contribute incremental profits to related enterprises.