I just wondered whether you had any thoughts on Lumber given the recent price action? Thanks and keep up the excellent work, I'll definitely be renewing my annual subscription (as I have been for more years than I care to count!)

Eoin Treacy's view

Thanks for this topical question and your long-term patronage. Serving loyal long-term subscribers is why I happily regard this service as a vocation. 

Lumber is back in the $400 area; having completely unwound the pandemic surges. This area is the upper side of the very long-term base formation so it is reasonable level to question whether this is a good entry point. Last week’s upward dynamic was certainly encouraging.


The compression in bond yields and continued strength of the labour market are encouraging speculators back into the housing market. Toll Brothers and KB Home have both broken medium-term sequences of lower rally highs. 

It is unreasonable to expect lumber prices to surge back to $1600 any time soon but there could easily be a 100% pick from the lows near $400. The housing sector is one-way bet on interest rates. If the Fed is forced to cut rates this year and supply has not caught up, the sector should do fine. If the Fed is worried about the number of excess jobs relative to the size of the workforce, they will be less inclined to cut rates. That would weigh on prices because of affordability concerns. My gut tells me this is a recipe for big trough to peak swings this year.