The bearish trend in commodity currencies has similarly been the second-worst of the post-Bretton Woods era, topped only by the early 1980s rout powered by the 1983-84 Fed tightening cycle. From their 2011 peak, four commodities have depreciated at least 50% currencies (ARS, BRL, RUB, ZAR), and five others are down about 30% (NOK, AUD, COP, CLP, MYR).
The commodities are experiencing what has already been the second-deepest and longest bear market of the past 45 years, with a decline from their peak of over 55% over the past 4.5 years. Only the post-Lehman plunge was steeper (61% peak-to-trough).
The expectation for 2016 is that any influential factors on the supply front to stiffen market equilibriums and kick up prices, as we've been rationally assertive that demand cannot alone improve implicitly in 2016 given the EM issues addressed. Oil is the only sector where sufficient supply adjustment is underway to lift prices in 2016.
We don't think Chinese fiscal stimulus perhaps does more than stabilize industrial production growth near 6% around the turn of the year rather that drive a multi-quarter acceleration).
And since each of the seven bear markets in commodities over the past 45 years has ended through some combination of supply curbs and demand revival (usually after central banks cut rates).
Even if more easing from the ECB and BoJ could lift European and Japanese growth, that boost wouldn't support commodity demand meaningfully since China is a larger consumer of almost every commodity than these two regions combined.
Thus, the key drivers of this current bearish trend are - China's industrial slowdown, rising commodity supply in every sector and almost every region but US shale, and interest rate cuts in most commodity-exporting countries (except Russia, South Africa, Brazil and Colombia).
