With copper down 4.5% and oil down 6%, today saw dramatic moves in commodities, Roger Hirst told Real Vision during today’s Daily Briefing.

Hirst said the dip may have to do with portfolio rebalancing at the month’s end as well as expiry day, but it could be a signal that the recovery is running out of steam and beginning to roll over. Because copper is often an early warning system, Hirst said it will be important to watch where it goes from here.

If we get follow through on today’s moves, it may be telling us something, he said. And although right now this is happening in commodities in isolation, Hirst said he will also be looking for follow through from bond yields to confirm the signal.

Hirst also discussed the pressures central banks are under to create reflation in an environment of low productivity, low growth, and a weaker dollar during the interview. He explained that countries have tried to reflate their economies by doing QE to manipulate their currencies and get inflation, but they have instead contributed to asset price inflation.

This happens because they devalue the cost of capital, money velocity falls, long-term investment horizons look terrible, long-term growth expectation falls, and people realize they can get a better return buying equities than doing innovation and investments, he said. This creates a downward spiral of lower and lower productivity and growth, and meanwhile everyone is trying to get their currencies weaker through more QE, which destroys future growth expectation.

Hirst said the past 10 years of QE and currency battles by the back door made for a weaker overall framework and this is where we were when COVID hit.

Hirst concluded the conversation with his thoughts on the bullish U.S. narrative of recovery while the rest of the world is still playing the bear market trend. He said that liquidity hasn’t reflated the economy; it has inflated asset prices concentrated in specific markets in the U.S. and in large cap U.S. tech shares.

When you look at the bigger picture, most markets are still in a muddle through scenario—and it’s important to note that U.S. outperformance is only being driven by seven stocks.

“It has been a terrible distribution of money,” he said. “It has not gotten through to the right parts of the economy. The money has massively benefitted the concentration story within equities, but in five years, we don’t expect renewed growth.”