Well, U.S. markets are opening sharply higher this morning, and this does come after a brutal sell-off last week that put the Dow Industrials and Nasdaq in correction territory.
And like last year, the major averages are looking at a red first quarter.
The Iran war being the key geopolitical factor that has weighed on equities in 2026, and we've seen a rotation out of the MAC-7 as well this quarter, even before the conflict in the Middle East broke out.
Now, oil has been the clear winner when it comes to commodities, but investors might consider looking for opportunities elsewhere.
Ag commodities have broken out of a nearly two-decade-long resistance level, and we are looking at sugar prices rebounding from historical support levels.
And although gold has plunged in March, the precious metals decoupling from overall equities and also rising in step with oil as well as other hard assets.
Well, joining me to weigh in this morning is Otavio Costa, founder and CEO of Azuria Capital.
Otavio, good morning.
Thank you so much for joining us.
While with major U.S. stock averages on their longest losing streak since 2022, let's get your take on where U.S. equities stand amid the conflict and also the surge we're seeing in oil prices.
Yes, look, things look very overdone on the selling, in my view.
I also I think we're seeing that in changing the behavior of the markets overall now with oil prices rising and other metals and other hard assets actually behaving well as well.
I think there is an emerging big macro trade, which is long U.S.
Treasuries that is also very, very compelling.
I think that rates are going to come down substantially here, especially the long end.
And I don't know if it's due to a recession.
I don't know if it's just mechanics of how the government will try to manipulate rates lower.
But I do think there's going to be a big force in the macro state trying to reduce interest rates and the cost of the debt.
And that's going to have a very significant impact on the long side of the rates environment.
I think the entire rate curve will fall, but particularly the long end that is very stretched right now alongside with this declining markets as well.
What we're seeing on the VIX side, volatility is very pronounced.
I don't think those types of volatility increases are usually very sustainable at these levels.
So I would suspect that things will come down substantially there as well.
But we're seeing the sort of domino effect into the commodity space, as you mentioned in the very beginning of the question.
Energy costs moving higher should have also a big tailwind for agricultural commodities, which I think are in the early stages of a move as well.
Yeah, and Otavio, while I have you here, I do want to get your take on gold miners.
So, of course, we're paying attention to the rate outlook for the Federal Reserve as well as other global central banks.
But it's interesting to look at bond yields this morning and how government bonds are doing better than last week at a time when we're concerned about inflation as well as global growth.
So can you tell us how gold miners are trading relative to gold prices?
Gold miners have behaved quite well in a very resilient way, in my view, mostly because at these price levels of metals, it's still a very incredibly good business for those that are mining gold that call it sub $2,000 an ounce, and it's all in sustaining cost.
And those are really good margins.
And so going from 5,500 to 4,500, It's not that much of a change in the business in terms of profitability.
So these companies are doing quite well and therefore why we're seeing the resilience.
I think that it's time to be positioned into those high quality names in the space.
That's been my focus.
I've been adding to a lot of the mining companies that I do think are very well positioned for the cycle. getting a 40 35 discount in some of these prices to me is a gift and so this is i'm seeing this as a window of opportunity i think the mining industry is positioned very well uh to perform as gold prices sort of find a uh are in the process of finding a bottom here and so we may see actually mining companies outperform the metals in a big way in this part of the cycle.
That would be my estimate and expectation for this whole industry to continue to do well.
Just a quick reminder, I mean, just U.S. government alone is looking to deploy about $200 billion into the mining industry as part of their plan for the Department of Defense. given that we need critical minerals and the creation of reserves for those minerals for the US economy, that is larger than the whole industry.
And so we're seeing an enormous amount of inflows into the space.
And it's very unlikely that this is the end of a cycle and very likely that we're at the very early stages of a big move in most of these, that industry and the overall space of metals.
And so very excited to be part of this as well.
Yeah, and Otavio, while I have you here, you just mentioned minerals, and that is an area that we're paying attention to.
But we know that oil as well as gold have been stealing the spotlight here when it comes to commodities.
But the longer that the Strait of Hormuz is effectively closed, there are going to be supply chain shocks.
So tell us your view on other ag commodities here, whether we're talking about sugar, copper, or even fertilizer.
Yeah, look, I'm not a huge fan of the fertilizers because energy costs tend to impact them as well.
I think there are some companies that could do quite well in that part, but it's not my favorite place to be an investor.
I do like the pure agricultural commodity place like wheat, corn, sugar. uh are cotton all those if you notice these charts uh chart patterns are all very similar they are all breaking out in call it three to four years uh resistances and are likely to be accelerating to the upside in some cases like sugar you go back a lot further and there's a major line that used to be a support or resistance And now it has become a major support.
I suspect the sugar prices are going to move a lot higher.
Another interesting part about the commodity space or the agricultural commodity space is that you're seeing a lot of the positioning in that market being very, very short.
And so that reminds me of energy six, seven months ago when oil and that gas were both very shorted commodities.
And so I would pay attention to what's happening with the rotation. across the commodity space.
Not too long ago, it was all about silver, then gold, then copper.
Now we're talking about energy commodities, particularly oil.
At some point, we're probably going to start talking about agricultural commodities, too.
I think that's the next trend.
And I would not, no, I think there's plenty of room for this to accelerate to the upside.
Now, we need to think about as citizens, as macro investors, as politicians, whatever you are, we need to think about the society ramifications we may have given this increase of agricultural commodity prices that will have an impact on food prices as well.
And so that's going to be the next thing to consider for those.
And as severe as we have of inequality issues, I suspect that that can be a very significant change in politics as well.
So I'm paying attention to that too, but there are plenty of ways to invest in this, as I mentioned, and pure agricultural commodities in the future markets is one of them.
Yeah, and Otavio, you highlight a very important point here, because in addition to what's happening in terms of agriculture, futures prices, of course, the cost of living across major economies, that is a concern as well.
So when it comes to emerging markets, I do want to get your take on what we're seeing in particular Brazil, because when we talk about EM, we can't lump all nations together in that sector.
That's right.
About 80% of the emerging markets index is Asia.
About 7% of the index is in Latin America.
So we may see a major rebalancing of the weight within the MSCI emerging markets index that would be very positive for Latin America. a very large percentage of that 7% is actually Brazil.
So I love Brazil, but I think there's going to be a huge opportunity across the entire region of Latin America.
I really think that Bolivia would be a very significant winner of this next decade, just because it has never seen foreign capital attracting that economy.
I've got major, in my own portfolio, investments in that part of the world.
I think that's going to be a big shift.
It's almost like El Salvador, but we haven't seen the positive shift just yet.
We have seen a transition of the government, but not that yet.
Now, Brazil specifically is a very significant potential winner of all these changes in the commodity space.
It's a country that has, I'm actually speaking from Brazil now, and there's all sorts of also positive impacts given that the economy is exposed to every commodity you can think of, from energy, from metals, from agricultural, Uh, cattle, I mean, any, anything you can think of the country is, is, is driven by commodities.
And so I suspect that we're going to see some real significant, uh, um, upside, uh, potential in the, in the country.
I think equities are in the early innings of a big move. in the Brazilian equity markets.
All these pullbacks that we saw in the last few weeks to me are major opportunity points and another window of opportunity for investors to be redeploying capital there.
So I've been putting capital to work in Brazil.
I think it's going to be a place for the next five to 10 years.
I don't think anybody is late to the party.
In fact, I think the timing right now is particularly very interesting.
And I suspect we're going to be onto a very significant wave of investments that will come back to Latin America.
Brazil, not only all that, but also there is a potential for a shift in politics.
We're seeing Bula now losing momentum, if that happens, if that accelerates again, I think that that could be a fundamental shift to the country as well.
That is just the cherry on top of the whole thesis.
A lot of people are thinking that that needs to be the thesis.
That's very, that's not true at all.
I mean, the truth is the foundation of the thesis, given the commodity markets, is extremely attractive for investments in the country.
If we do see a change in politics, that would be just the extra tailwind that we may see.
And I do think we're going to see that as well.
Well, Otavio, we will have to leave it there for today, but thank you so much for joining us on this Monday morning.
And as always, thank you so much for your perspective and your insights.
