Stagflation is no longer a forecast; it is here. Fiscal deficits are ballooning, inflation remains sticky, and growth is rolling over in almost every advanced economy, particularly Canada and the U.S. What is different this time is the structural policy backdrop creating demand that cannot simply vanish in a slowdown.
This confluence is driving an early-stage capital rotation: away from financialized assets like real estate and big tech, and into hard assets (energy, metals, and infrastructure). Gold and silver are already breaking out. Copper inventories are scraping along historic lows. Battery metals like nickel and lithium remain supply-constrained, while unglamorous commodities like steel and cement are quietly embedding themselves as inflation drivers.
For Canada in particular, the pressures are sharper. Prime Minister Carney’s Major Projects Office (MPO) has unlocked over $100 billion of shovel-ready net-zero projects (EV plants, transmission corridors, renewable power) but there are still no pipelines. This bifurcation means net-zero sectors thrive while hydrocarbons stagnate, leaving Canada unable to capture the export revenues that offset US-driven inflation. Residential real estate faces record inventories, while commercial property is stuck in a structural downturn.
The thesis is clear: stagflation is here, and capital rotation into commodities has begun. The next 18 months will set the stage for what could be a decade-defining supercycle.
Gold and Silver — Early Signals of Rotation
Gold has surged past US$3,600/oz, breaking decisively out of its decade-long consolidation band. This is not a speculative rally but a structural repricing: deficits in both Canada and the U.S. have reached levels that markets no longer believe can be reversed without financial repression. Gold is the hedge against fiscal excess.
Silver, meanwhile, has crossed US$40/oz. Unlike gold, silver straddles two worlds: it is both a monetary hedge and a core industrial metal. Solar panels, EV batteries, and semiconductors all require silver in scale. The gold-to-silver ratio has tightened meaningfully, signaling capital is flowing further down the commodity chain. Historically, compression in this ratio has been an early marker of broad commodity bull cycles.
In a stagflationary environment, these moves are not aberrations; they are leading indicators.
Capital is already positioning.
Copper — The Backbone of Net-Zero
If gold is the hedge, copper is the workhorse. Every net-zero policy (EV adoption, grid upgrades, renewable generation) requires copper in vast amounts. Yet supply growth has stalled. New projects in Chile and Peru face community opposition and water constraints. African supply remains geopolitically fragile.
London Metal Exchange inventories now sit at less than one week of global demand; the tightest balance in more than a decade. Prices above US$4.50/lb reflect this scarcity, but they may not yet price in the sheer scale of future demand from electrification for both net-zero requirements and the agentic workflows described in a previous newsletter (see The Hard Power Behind Autonomy).
Copper is not a cyclical play on construction. It is the structural commodity of the energy transition. Against a stagflationary backdrop, where industrial demand is state-mandated, copper becomes a policy-backed asset.
Nickel and Lithium — Battery Metals Under Pressure
Nickel’s steady climb to over US$32/lb highlights its dual role: stainless steel for traditional industry and battery cathodes for EVs. As automakers shift toward nickel-rich chemistries for higher performance, demand is accelerating faster than supply. Indonesia dominates new production, but environmental and ESG concerns limit Western investment.
Lithium has been volatile, but it is entering a second wave of investment. The first wave built supply in South America and Australia; the second is about North American and European governments scrambling to secure domestic supply chains. Prices have stabilized in the high teens per pound, suggesting the floor is higher than in prior cycles.
Both metals embody the stagflationary paradox: governments will not allow demand to collapse, but supply takes years to build.
Steel and Cement — Inflation Engines in Plain Sight
Investors love to talk about gold and copper, but steel and cement are the commodities that make every project possible. Carney’s MPO projects in Canada (highways, transmission lines, EV plants, and housing initiatives) all consume vast amounts of both.
Steel prices have risen steadily, reflecting strong demand from both public infrastructure and private industry. Cement is the hidden driver: energy-intensive to produce, carbon-constrained, and logistically sticky, its prices are quietly ratcheting higher.
These are not glamorous trades, but they are unavoidable. Every dollar of infrastructure spending flows directly into steel and cement demand, embedding inflation at the core of the economy.
Oil and Natural Gas — From Avoidance to Necessity
Oil remains institutionally under-owned. After a decade of ESG divestment, energy allocations in pension and endowment portfolios are near historic lows. Yet demand has not collapsed. Global consumption continues to rise, with Asia driving incremental growth.
WTI has stabilized around US$64/bbl, but this balance is fragile. Geopolitical risks remain, OPEC discipline is holding, and U.S. shale growth is slowing as capital discipline trumps volume.
Natural gas tells a similar story. U.S. Henry Hub has moved back above US$4/MMBtu, reflecting resilient industrial demand and LNG exports. The U.S. has the advantage of flexible LNG export infrastructure, allowing it to monetize its supply globally.
Canada does not. Without pipelines and LNG capacity, Canadian gas remains stranded, often selling at steep discounts. This is the structural divergence: U.S. energy can offset inflation through exports, while Canada absorbs inflation domestically.
Residential Real Estate — From Capital Magnet to Risk
For two decades, Canadian and U.S. housing absorbed global capital. Ultra-low rates, favorable tax treatment, migration flows, and speculative fervor created what looked like a perpetual one-way bet. Homes became financial assets as much as dwellings, with entire generations conditioned to treat housing as the safest and most lucrative store of wealth. That era is now ending.
Inventories in both Canada and the U.S. are at multi-decade highs, and affordability has collapsed under the weight of higher mortgage rates. Even as central banks begin to cut, the hurdle is no longer interest rates alone but stagnant household income. Median wage growth is not sufficient to restore buying power, and the price-to-income ratios remain far outside historical norms. Falling rates may soften the monthly payment shock somewhat, but they cannot close a structural gap that has been building for more than a decade.
In Canada, the problem is even sharper. Immigration-driven demand is colliding with regional oversupply, particularly in Ontario and parts of Western Canada where pre-construction units are hitting the market at the same time as buyers pull back. Household leverage is among the highest in the OECD, magnifying downside risk.
The debt-service ratio for Canadian households has already reached record highs, meaning that even modest stress in employment or interest rates could trigger defaults and forced selling. By contrast, the U.S. market is somewhat cushioned by fixed-rate mortgage structures and lower household leverage, giving American homeowners more breathing room.
The narrative of housing as a perpetual capital magnet is breaking down. What once functioned as Canada’s primary absorber of savings and foreign capital is shifting into oversupply, with affordability out of reach for new buyers and financial risk concentrated among highly leveraged households. This transition not only undermines the wealth effect that fueled consumption for two decades but also redirects capital flows toward other hard assets, most notably commodities, where structural demand is rising and supply remains constrained.
Commercial Real Estate — Hybrid Work’s Lingering Shadow
Commercial property faces a structural decline that no short-term policy shift can mask. Hybrid work has become entrenched across sectors, with office utilization still hovering at 50–60% of pre-pandemic levels in most major cities. Employers are experimenting with mandates and incentives, but the reality is clear: the work-from-anywhere model has permanently reduced tenant demand for traditional office space. Policymakers and corporate landlords are pressing for a “return to the office” to stabilize valuations, yet tenant rollover data and sublease availability tell another story.
The U.S. market, while challenged, benefits from deep and liquid capital markets. Assets can be repriced, recapitalized, and in many cases repurposed into residential or mixed-use space. Canada, by contrast, has a more concentrated risk profile. Urban office towers in Toronto, Vancouver, and Calgary are heavily owned by banks, pension funds, and insurance companies with limited flexibility to absorb large mark-to-market losses. Vacancy rates are climbing toward record highs, refinancing costs are rising, and valuations are being quietly written down.
At the same time, governments are forcing workers back into the office, not because productivity demands it, but to defend the value of the commercial real estate stock underpinning financial institutions. This policy-driven push highlights the fragility of the system: employment patterns are being shaped not by efficiency or worker preference, but by the need to prevent cascading write-downs in real estate portfolios.
Commercial property will not return as the capital absorber it once was. Instead, it is becoming a drag on the financial system, tying up capital in low-return assets and reducing the flexibility of Canadian banks and pensions to allocate into growth sectors. The contrast with commodities is stark: while real estate capital is stuck in overbuilt offices, metals, energy, and infrastructure inputs face structural undersupply.
The capital rotation away from commercial real estate and into hard assets is not optional; it is a necessary adaptation to a new macro reality.
Canada vs U.S. — Divergence Through Policy
The Major Projects Office is not hypothetical. Over $100 billion of projects have been approved, with many already under construction. That means demand for labor, steel, copper, and cement is locked in. These projects will create employment and spending flows regardless of cyclical slowdowns.
While the MPO headlines suggest a wave of fresh investment, most of the $100B slate is composed of projects that were already announced or in advanced planning. The policy shift is less about new capital formation and more about consolidating and fast-tracking net-zero aligned infrastructure (EV plants, renewable generation, and transmission lines). That ensures commodity demand will remain elevated, but it also limits the economic upside.
The problem is one of allocation. By focusing narrowly on net-zero mandates, Ottawa is backing projects with long paybacks and uncertain competitiveness, while higher-return opportunities (pipelines, LNG export terminals, and broader industrial infrastructure) remain politically blocked.
The U.S., by contrast, has paired its clean-tech push with hydrocarbons, LNG, and grid investment, capturing both near-term revenues and long-term energy security. Canada’s MPO, while supportive for metals and materials, risks becoming an inflationary drag: it locks in commodity demand without generating export earnings, leaving households and domestic industries bearing the cost.
This makes Canada even more vulnerable to stagflation than the U.S.
Capital Rotation — Still the Early Innings
For decades, institutional portfolios crowded into tech and real estate. Commodities were abandoned. Allocations sit around 4–5%, compared to a historical norm of 10–15%.
That underweight is now unsustainable. Gold and silver flows are accelerating. Energy ETF inflows are rising. Capital is searching for hard assets that can withstand stagflation.
This space is not yet crowded. By historical standards, we are in the first innings of a rotation that could run for years.
The Thesis — Stagflation + Rotation = Commodities’ Decade
Stagflation is no longer a forecast; it is reality. Fiscal expansion collides with sticky inflation and slowing growth. Canada faces a sharper version of this problem than the U.S., as Carney’s MPO guarantees commodity demand while pipelines remain blocked.
Real estate, once the primary absorber of capital, is now oversupplied and structurally challenged. Commercial property faces hybrid work. Residential affordability is broken.
Capital has begun rotating into commodities. Gold and silver are breaking out. Copper is structurally tight. Battery metals are policy-mandated. Steel and cement are quietly embedding inflation. Oil and gas remain under-owned.
For investors, the conclusion is straightforward: the next 18 months are critical for positioning. This is the opening phase of a decade-defining commodity supercycle.
About Moneta
Moneta is a boutique investment banking firm that specializes in advising growth stage companies through transformational changes including major transactions such as mergers and acquisitions, private placements, public offerings, obtaining debt, structure optimization, and other capital markets and divestiture / liquidity events. Additionally, and on a selective basis, we support pre-cash-flow companies to fulfill their project finance needs.
We are proud to be a female-founded and led Canadian firm. Our head office is located in Vancouver, and we have presence in Calgary, Edmonton, and Toronto, as well as representation in Europe and the Middle East. Our partners bring decades of experience across a wide variety of sectors which enables us to deliver exceptional results for our clients in realizing their capital markets and strategic goals. Our partners are supported by a team of some of Canada’s most qualified associates, analysts, and admin personnel.