The oil price is just the beginning…

I’m going to hit you with five charts today that are showing how the ‘smart money’ is positioning.

And it’s pointing to one thing: big upside for energy and energy commodities.

Now, you’d be thinking…wait, isn’t the oil price up a lot already?

Surely all the money has been made already.

But I think, given the charts I’m about to share with you, that this is only the beginning of a far larger move for energy and energy commodities.

I wrote yesterday about how gas is the next natural extension of the market’s focus on energy.

And how that should benefit Australian gas developers.

But beyond that, there’s a whole complex of energy and raw materials that should benefit from this renewed focus.

The charts below are drawn from the most recent Bank of America Global Fund Manager Survey. These show how the big hedge funds and money manager are positioning their portfolios.

Below each chart, I’ll share my commentary and the significance of what’s going on.

Now, let’s get into it.

Exhibit A: Investors skittish in face of war
(but not freaking out)

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This overall measure of sentiment of fund managers is receding (far right), meaning money managers are nervous.

And fund managers have quickly moved to hedge war risk, lifting cash and trimming risk, but they haven’t hit the panic button properly yet.

Exhibit B: Cash levels jump…but could
this redeploy elsewhere?

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We’re about halfway back to the October 2022 cash levels, which was effectively peak fear in this cycle.

It could be a chance for rotation, however, but to do that, we need to avoid a nasty infestation of “cockroaches” emanating from the opaque private credit markets.

Exhibit C: Private credit fears
resurface – is this 2007/2008

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And it appears the money boffins are worried about exactly such a thing.

There are plenty of increasingly loud whispers from the private credit markets that all is not well.

However, if the coast becomes clear (on the private credit front), where would these people deploy their higher cash levels (Exhibit B above)?

The answer is quite unanimous for these money folk right now…

Exhibit D: Of course, we
all love commodities!

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The money managers are nearly at their highest level of commodity exposure in two decades.

Surely, commodities are due for a switch?

Not so fast…

Exhibit E: But wait, energy stock
allocations have barely budged?

This is by far the most interesting chart in the context of the past charts…

Below you can see that fund managers are effectively neutral in terms of their exposure to energy:

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Yes, with oil prices through the roof.

With Qatari gas threatening to be offline for an extended period.

And longer-term, the hyperscalers are going to need a heap of energy for their data centres.

Here’s what this all means…

The focus will be on energy and energy raw materials.

First oil, second gas, then a whole complex of materials.

That means lithium, uranium and the material that makes it all conductive – copper.

For me, that’s where attention eventually has to turn over the next 3–6 months.

It all feeds into my latest major investment idea, which is called Pax Silica – learn more about that here.