Markets & Metals Navigator: Equity Inflows + Copper Prices Surge

Money Keeps Flowing into Global Equities

In 2021 we’ve seen the largest weekly inflow of capital ever into global equities. In excess of $58 billion poured in last week, lead by investments into U.S. equities and the technology sector.

Stimulus measures across the world, low bond yields as well as optimism that vaccination measures can lead to a reopening of major economies have strongly bid up risk assets.

The S&P 500 is up 4.8% year-to-date (ytd), while the tech heavy Nasdaq is up 9.4% ytd.  The S&P/TSX has also had a strong start in 2021, rallying 5.9% ytd on the back of strong commodity prices.

Bitcoin Flirts with $50K as Tesla Makes a Splash

The crypto tanker keeps rolling ahead, Bitcoin surged last week to all-time highs after Tesla announced that it had invested $1.5 billion on its balance sheet.  Elon Musk had hinted his Bitcoin interest in January when he added #bitcoin to his Twitter profile.

Elon’s move could very likely force the hand of other technology leaders towards adopting Bitcoin, as they don’t want to be seen as technological laggards.

Copper Prices Surge

Copper prices continue to climb higher in Asia today, reaching the highest level since 2012, on the back of tight mine supply and strong global demand.

Copper contracts advanced 1.4% to $3.84/lb on the Comex, the base metal is on track for its 11th straight monthly gain.

Sierra Metals (NYSE:SMTS, TSX:SMT) is the copper miner that continues to screen well globally, the company trades at a material discount its copper, silver and gold peers.

In early January Sierra Metals announced that it was undertaking a strategic review to maximize shareholder value through a potential sale of some or all assets, or merger. We believe the current macroeconomic environment (bullish for commodities) provides an attractive backdrop for the company to unlock value in the company.

Platinum Rally

Platinum has rallied to the highest price in 6 years, driven by signs that an economic recovery from the pandemic will boast demand for the metal used in catalytic converters.

Platinum has rallied 24% year-to-date, outperforming all other precious metals.  The current supply deficit is set to widen with the emphasis on clean energy and increased number of vehicles on the road post COVID-19.

Natural Gas Power Generation in Texas

Plunging temperatures in Texas has caused several power plants to go offline on Sunday, this triggered an emergency on the Texas power grid which led to 2 million homes losing electricity.

Natural gas fired plants have met most of the increase in power demand during the cold snap in Texas, with share of the market rising to more than 50% from 20%. Conversely wind farms share of the market slide from 42% to 8% as a result of ice interrupting the turbines.

Natural gas prices (Henry Hub) in North America are up 22% year-to-date; the Energy Select Sector SPDR ETF (NYSE:XLE) is up 18% ytd.

WallStreetBets Squeezes Cannabis Stocks

The reddit wallstreetbets mania continues to supercharge stock prices, last week their focus was on US listed cannabis companies with high short interest.

The group specifically targeted Sundial (NASD:SNDL) and Tilray (NASD:TLRY), sending shares as high as 152% and 149% respectively by Wednesday last week. Subsequently the share tumbled however they were able to hold gains for the week.

Bloomberg indicates short interest for Sundial and Tilray are 5% and 27% respectively. We believe traders will continue to push for the short squeeze in Tilray, as the company will be merging with Aphria this year – a much better run operator.

Sierra Metals is a market awareness client of Capital 10X.

Capital 10X gets down to the real money business, actionable financial insights for traders and investors. We analyze company earnings, interview management teams and help teach the fundamentals of financial analysis and options trading. Our mission is to hunt for genuine 10 baggers.


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