3/3 ETFs FOR ROTATING INTO PHYSICAL ASSETS

2 June 2026

Overview

For four decades capital flowed into financial assets as falling interest rates, rising debt and globalisation inflated stocks, bonds and property. Today the pendulum seems to be swinging back towards the physical economy. 

Gold, energy, industrial metals, agriculture, infrastructure and water all sit at the foundation of modern civilisation, and growing scarcity is forcing investors to take notice. 

This article examines the possible sequence of that rotation between physical asset classes, and explores the ETFs that provide exposure to the tangible assets in those classes upon which economies ultimately depend.

1. ROTATING FROM FINANCIAL ASSETS INTO PHYSICAL ASSETS

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For almost four decades investors have lived through an extraordinary era of financial asset inflation.

Falling interest rates, globalisation, expanding debt, and central bank liquidity pushed capital towards stocks, bonds, property and financial engineering. Financial claims multiplied far faster than the growth of the underlying physical economy.

Today that relationship is changing.

A growing number of investors believe we are entering a period where scarcity of physical resources matters more than abundance of financial capital. Energy security, supply chains, demographics, rearmament, reshoring and geopolitical fragmentation are all placing renewed emphasis on tangible assets rather than paper claims.

If this thesis proves correct, capital may continue rotating from financial assets towards the physical foundations of industrial civilisation.

The key question is not whether such a rotation occurs, but in what sequence.

Financial assets – Claims on future cash flows such as shares, bonds and derivatives.

Physical assets – Tangible resources such as energy, metals, farmland and infrastructure.

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2. PHASE ONE: MONETARY DEFENCE

The first destination is usually the monetary metals gold and silver.

Gold requires no economic growth, no earnings and no productive activity. Its primary function is monetary defence. When investors become concerned about inflation, excessive debt, currency debasement or geopolitical instability, gold often becomes the first refuge.

Historically, gold tends to move before most other commodity sectors because it responds directly to monetary fears.

Silver occupies a unique position. It is both a monetary metal and an industrial metal. Early in a cycle gold often leads. Later, as industrial demand strengthens, silver can outperform.

Mining companies typically lag the initial rise in bullion prices before accelerating as higher commodity prices flow through to profits.

Possible ETF examples include:

• Physical gold funds such as SGLN, GLD, IAU and SGOL

• Gold miner funds such as GDX, GDXJ, AUCP and RING

• Silver funds such as SLV and SIVR.

A common hierarchy is:

Physical gold (SGLN, IAU, GLD)

Senior miners (GDX)

Junior miners (GDXJ)

Monetary defence – Preserving purchasing power during periods of financial instability.

Senior miner – A large established producer with multiple operating mines, significant reserves and substantial cash flow.

Junior miner – A smaller producer, developer or explorer with higher growth potential but greater operational and financial risk.

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3. PHASE TWO: ENERGY BECOMES THE FOCUS

Energy is the master commodity.

Every mine, farm, factory, truck, ship and data centre depends upon energy. Rising energy costs eventually spread through the entire economy.

This phase becomes particularly powerful when investors conclude that supply constraints are structural rather than temporary.

Recent tensions around the Strait of Hormuz are illustrating this dynamic. Markets can tolerate cyclical disruptions. They react very differently when critical transport routes appear vulnerable over extended periods.

Oil and gas producers often benefit first. Pipeline operators follow. Uranium has become increasingly important because nuclear energy requires long planning horizons and substantial capital investment.

Unlike many commodities, new uranium supply can take a decade or more to develop, creating the potential for prolonged shortages.

Possible ETF examples include:

• XLE, VDE and IXC for broad energy exposure

• URA and URNM for uranium exposure

Structural shortage – A shortage caused by long-term supply limitations rather than temporary disruptions.

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4. PHASE THREE: INDUSTRIAL AND STRATEGIC METALS

Once energy pressures begin filtering through the economy, attention often shifts towards industrial metals.

Copper is frequently called the metal of civilisation.

Electric grids, renewable energy systems, electric vehicles, data centres, military equipment and industrial reshoring all require enormous quantities of copper.

Aluminium plays a similar role across transport, aerospace and manufacturing.

Rare earth elements occupy a special category. They are essential for modern electronics, advanced motors, missile guidance systems and defence technologies. Yet production remains highly concentrated geographically, creating strategic vulnerabilities.

As governments pursue both energy transition and military rearmament, demand for these materials may remain robust for years.

Possible ETF examples include:

• AIGI for industrial metals

• COPX for copper miners

• PICK for diversified mining exposure

• REMX for rare earth and strategic metals

Rare earths – A group of strategically important elements used in advanced technologies and defence systems.

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5. PHASE FOUR: AGRICULTURE AND FERTILISERS

Food inflation tends to arrive later - although as much as half of the world's fertilizer is produced from compounds from the Gulf putting very large numbers of people into food scarcity possibly by autumn this year.

Governments intervene aggressively when food prices rise because food security is politically sensitive.

Nevertheless, agriculture remains heavily dependent on energy and fertilisers.

Nitrogen fertiliser depends largely on natural gas. Phosphate production is concentrated in a small number of countries. Potash supply remains influenced by geopolitical developments involving Ukraine Russia and Belarus.

These dependencies mean agricultural markets can become vulnerable after prolonged energy shocks.

Agricultural commodity funds offer one route for investors, although many rely upon futures contracts and therefore incur roll costs that may reduce long-term returns.

Agribusiness companies and fertiliser producers often provide a more durable route into the sector.

Possible ETF examples include:

• DBA for diversified agricultural commodities

• WEAT and CORN for specific crop exposure

• MOO and VEGI for agribusiness exposure

Roll cost – The cost incurred when futures contracts are repeatedly replaced as they approach expiry.

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6. PHASE FIVE: INFRASTRUCTURE AND WATER

The final stage often involves long-duration real assets.

Water systems, electricity grids, ports, pipelines and transport networks are difficult to replicate and essential to economic activity.

These assets often possess pricing power and inflation linkage. They may therefore attract institutional capital seeking both income and protection against inflation.

Unlike commodity producers, infrastructure assets frequently behave more like inflation-resistant utilities.

Water deserves particular attention because population growth, industrial demand and climate pressures continue increasing its strategic importance.

The grid for demands from AI.

Possible ETF examples include:

• PHO

• FIW

• CGW

Real asset – A physical asset whose value is linked directly to tangible economic activity.

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7. WHAT ABOUT DEFENCE?

Defence occupies an unusual position.

Unlike energy, agriculture or metals, defence does not directly expand society's productive capacity. However, geopolitical competition is causing many governments to increase military expenditure substantially.

As a result, aerospace and defence companies have become beneficiaries of the current geopolitical environment.

Investors seeking exposure commonly use funds such as ITA or XAR.

Whether defence spending represents productive investment or resource diversion remains a matter of debate. Economically, resources directed towards defence cannot simultaneously be invested elsewhere.

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8. THE BIGGER PICTURE

The deeper issue is not simply inflation.

It is the possibility that the developed world is moving from an era dominated by financial abundance towards one constrained by physical scarcity.

For years capital flowed disproportionately into financial assets. Debt expanded faster than production. Asset prices rose faster than physical output.

Now the world faces ageing populations, fragmented supply chains, rearmament, energy security concerns and growing competition for strategic resources.

As these trends seem likely to persist, investors may increasingly favour ownership of the physical foundations of the economy rather than claims upon them.

1. Gold may be the opening chapter.

2. Energy may be the catalyst.

3. Industrial metals, agriculture, infrastructure and water may ultimately become the longer story.

Whether this becomes a temporary cycle or a secular shift will be one of the defining investment questions of the coming decade.

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REFERENCES

SGLN

SPDR Gold Shares (GLD)

iShares Gold Trust (IAU)

VanEck Gold Miners ETF (GDX)

AUCP

Energy Select Sector SPDR Fund (XLE)

Global X Uranium ETF (URA)

AIGI

Global X Copper Miners ETF (COPX)

Invesco DB Agriculture Fund (DBA)

VanEck Agribusiness ETF (MOO)

Invesco Water Resources ETF (PHO)

iShares U.S. Aerospace & Defense ETF (ITA)

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2/3 ROTATION FROM FINANCIAL INTO PHYSICAL - EFFECT OF HORMUZ CLOSURE

1 June 2026

Here's a revised version of the previous post comparing financial assets with physical assets, that integrates the Strait of Hormuz crisis as a central catalyst.

Overview: Hormuz And The Return Of Physical Reality

For decades investors focused on financial assets, debt and digital wealth. The closure of the Strait of Hormuz in February 2026 was a reminder that civilisation still runs on physical systems. Energy, shipping, minerals, food and infrastructure remain the foundations upon which all financial claims ultimately depend. When those foundations are disrupted, markets rediscover the real economy.

Rotate from financial assets into physical

1. Rotate From Financials Into Physical

On 28 February 2026 something happened that may come to be seen as one of the defining economic events of the decade.

The Strait of Hormuz, through which roughly a fifth of global oil trade normally passes, effectively ceased functioning as a normal commercial artery following the outbreak of war between Iran, Israel and the United States. Shipping volumes collapsed, insurance costs exploded and hundreds of vessels became stranded across the Gulf.

For years investors spoke about geopolitical risk.

Suddenly geopolitical risk became physical reality.

The event exposed something deeper than a temporary energy shock.

It revealed how dependent the global economy remains upon a relatively small number of physical systems.

And it reminded investors that civilisation ultimately runs on molecules, minerals, energy, food and logistics rather than on financial claims.

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2. Forty Years Of Financialisation

For much of the last four decades capital flowed disproportionately into financial assets.

Debt expanded.

Asset prices rose.

Derivatives multiplied.

Private equity grew.

Property boomed.

Government deficits widened.

Meanwhile many sectors of the physical economy experienced chronic underinvestment.

Mining investment stagnated.

Refining capacity declined.

Electric grids aged.

Nuclear programmes stalled.

Water infrastructure deteriorated.

Commodity sectors became deeply unpopular among investors.

The message from markets was clear:

Financial assets appeared superior to physical assets.

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3. Hormuz Was A Warning Signal

The Strait of Hormuz crisis exposed the fragility of that assumption.

Within days of the disruption, tanker traffic reportedly fell by more than 90%. Oil prices surged. Shipping costs rose dramatically. Insurance markets became stressed. Energy-importing nations scrambled to assess supply risks.

The important lesson was not merely about oil.

The lesson was about dependency.

Modern economies depend upon highly concentrated physical systems.

A handful of maritime chokepoints.

A limited number of mines.

A relatively small number of energy-producing regions.

A narrow set of supply chains.

When these systems fail, financial markets suddenly rediscover the physical world.

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4. The Physical Economy Reasserts Itself

The modern economy often creates the illusion that wealth is primarily digital.

Stocks appear on screens.

Bank balances appear as numbers.

Trillions of dollars move electronically around the world each day.

Yet beneath these abstractions sits a physical foundation.

Data centres require electricity.

Electric vehicles require copper.

Agriculture requires fertiliser.

Semiconductors require energy, chemicals, helium and water.

Military systems require steel, rare earths and explosives.

Nothing exists independently of the physical economy.

The Hormuz crisis served as a reminder that financial systems remain downstream from physical systems.

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5. Inflation Is Often A Physical Phenomenon

Many economists treat inflation primarily as a monetary issue.

Money supply matters.

Interest rates matter.

Credit conditions matter.

But physical scarcity matters too.

If energy becomes constrained, almost everything becomes more expensive.

Transport costs rise.

Food costs rise.

Industrial production costs rise.

The closure of a major energy corridor therefore becomes more than a regional geopolitical event.

It becomes a global inflationary event.

That is precisely why markets react so violently to developments in Hormuz.

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6. The Rotation Into Physical Assets

If the world is entering a period characterised by:

• supply constraints

• geopolitical fragmentation

• rearmament

• energy insecurity

• food insecurity

• industrial reshoring

• infrastructure renewal

then investment leadership may gradually change.

The beneficiaries may increasingly be companies controlling scarce physical assets.

Energy producers.

Pipeline operators.

Grid infrastructure.

Copper miners.

Uranium producers.

Fertiliser manufacturers.

Agricultural businesses.

Water systems.

Shipping infrastructure.

The market may begin assigning higher valuations to assets that are difficult to replicate and essential to societal functioning.

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7. Financial Claims Versus Real Assets

Financial assets are ultimately claims on future production.

But future production itself depends upon energy, materials, labour and infrastructure.

If physical constraints become more binding, then the relative value of real assets may increase.

This does not imply that stocks or bonds become worthless.

Nor does it imply civilisation is collapsing.

Rather it suggests that the balance between financial claims and physical productive assets may be shifting.

The past forty years rewarded ownership of financial assets.

The next decade may increasingly reward ownership of strategic physical assets.

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8. A New Investment Question

For many years investors asked:

"Which financial assets should I own?"

A different question may now become more important.

"What physical systems does the world desperately need more of?"

Energy.

Electricity.

Food production.

Industrial metals.

Water infrastructure.

Transport capacity.

These are not fashionable themes.

They are civilisation themes.

The Strait of Hormuz crisis did not create these realities.

It merely exposed them.

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9. Conclusion

The significance of Hormuz extends far beyond the Gulf.

It represents a warning from the physical economy.

For decades the world assumed that finance, technology and globalisation had largely conquered scarcity.

Events since 28 February suggest otherwise.

The real economy has returned to centre stage.

The world still depends upon energy flowing through narrow waterways.

Ships carrying raw materials.

Mines extracting copper.

Farmers producing food.

Engineers maintaining infrastructure.

The financial economy remains important.

But it sits atop a physical foundation.

When that foundation becomes stressed, capital eventually notices.

The great investment rotation of the coming decade may not be from one stock market sector to another.

It may be from financial claims back towards the physical systems that make civilisation possible.

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Glossary

Financialisation - the growing dominance of financial markets and debt-based activities within the economy.

Physical economy - the system that produces tangible goods and services such as energy, food, materials and infrastructure.

Chokepoint - a narrow strategic location through which critical trade or transport flows must pass.

Real assets - tangible productive assets such as energy reserves, mines, farmland, pipelines and infrastructure.

Supply constraint - a limit on the availability of goods, materials or productive capacity.

Strategic resource - a resource considered essential for economic stability, industrial production or national security.The deeper argument here is not really about Hormuz itself. Hormuz functions as a symbol of something larger: the return of physical constraints after decades in which markets behaved as though finance could indefinitely outrun geology, energy and industrial capacity. The closure simply made that reality impossible to ignore.

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1/3 FINANCIALS V. PHYSICALS

1 June 2026

Overview: Financial Claims Versus Physical Reality

The modern economy consists of two interconnected systems. The financial economy creates claims on future production through stocks, bonds and credit. The physical economy produces the energy, food, materials, infrastructure and labour that make future production possible. As physical constraints tighten and underinvestment becomes more apparent, investors may increasingly rotate from paper claims towards scarce, productive real-world assets.

1. Rotate From Financials Into Physical?

For much of the last forty years the world's financial assets have outperformed its physical assets.

Stocks rose. Bonds rose. Property rose. Derivatives multiplied. Debt expanded faster than the underlying economy. Financial engineering often appeared more profitable than building factories, digging mines, growing food or generating electricity.

Capital flowed accordingly.

Money migrated away from the physical economy and towards the financial economy.

The result was extraordinary wealth creation, but also a growing imbalance.

The financial claims multiplied far faster than the productive assets upon which those claims ultimately depend.

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2. Two Economies

It is useful to think of the modern world as containing two interconnected systems.

The first is the financial system.

This includes stocks, bonds, derivatives, bank deposits, private credit, mortgages and government debt. These are largely claims on future production.

The second is the physical system.

This includes energy, food, minerals, factories, transport networks, electricity grids, housing and skilled labour. These are the assets that actually sustain civilisation.

The financial system can expand rapidly through credit creation.

The physical system expands much more slowly because it is constrained by geology, engineering, demographics and time.

A mine may require ten years to develop. A nuclear reactor may require fifteen. A new generation of skilled engineers may take decades to train.

Eventually the physical world imposes limits upon the financial world.

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3. The Great Underinvestment

Many sectors of the physical economy have suffered prolonged underinvestment.

Energy infrastructure has aged.

Electricity grids require upgrading.

Mining investment fell sharply after the commodity downturn of the 2010s.

Fertiliser production remains vulnerable to geopolitical shocks.

Water infrastructure in many developed countries is decades old.

Meanwhile populations continue to grow and consumption continues to rise.

The consequence is increasingly visible.

Shortages emerge.

Prices rise.

Supply chains become fragile.

Governments intervene.

Inflation becomes more persistent.

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4. Inflation Is A Signal

Inflation is often treated purely as a monetary phenomenon.

Yet inflation can also be understood as a signal from the physical economy.

It tells us that demand for real goods and services is exceeding the capacity of the system to supply them.

An ageing population requires more healthcare.

Data centres require more electricity.

Electric vehicles require more copper.

Military rearmament requires more steel, aluminium and explosives.

Reshoring requires new factories.

The physical system is being asked to do more.

But the investment needed to support that expansion has often lagged behind.

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5. A Changing Investment Landscape

If the world is entering an era of greater scarcity, higher inflation and more geopolitical fragmentation, investment leadership may change.

The winners of the previous era were often financial assets benefiting from falling interest rates and expanding debt.

The winners of the next era may increasingly be those controlling physical resources.

Energy producers.

Pipeline operators.

Electricity infrastructure.

Mining companies.

Fertiliser producers.

Agricultural businesses.

Water utilities.

Transport networks.

These sectors are not glamorous. Many have underperformed for years.

Yet they occupy critical positions within the real economy.

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6. The Defence Factor

One complication is defence spending.

Across Europe, North America and Asia, military expenditure is rising sharply.

From a national security perspective this may be understandable.

From an economic perspective it creates trade-offs.

Resources devoted to weapons production cannot simultaneously be devoted to housing, power generation, transport infrastructure or industrial renewal.

The challenge for policymakers is to balance security requirements with the need to rebuild productive capacity.

The physical economy requires both.

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7. Financial Claims Meet Physical Constraints

History repeatedly demonstrates that financial systems can expand beyond the productive capacity of the real economy.

When this occurs, adjustments eventually follow.

Sometimes through inflation.

Sometimes through default.

Sometimes through financial repression.

Sometimes through currency debasement.

The precise mechanism varies.

The underlying reality does not.

Financial claims cannot indefinitely outgrow the physical assets and productive capacity that support them.

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8. Conclusion

A rotation from financials into physical assets is not a prediction. It is a possibility.

The argument rests on a simple observation.

For decades capital has flowed disproportionately into financial assets while many parts of the physical economy have been neglected.

If the coming decade is characterised by inflation, supply constraints, demographic pressures, geopolitical fragmentation and industrial rebuilding, then the balance may begin to shift.

The age of paper claims may gradually give way to the age of tangible assets.

Not because financial assets cease to matter.

But because civilisation ultimately runs on food, energy, materials, infrastructure and human labour rather than on financial claims alone.

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Glossary

Financial assets - Stocks, bonds, loans and other claims on future cash flows.

Physical assets - Tangible productive assets such as energy infrastructure, mines, farms, factories and transport systems.

Financialisation - The growing dominance of financial markets and financial activities within the economy. The West has built supply chains out to low cost labour countries and outsourced its production. Those countries invest their profits back into American debt. This raises the price of financial assets making financials more interesting than physicals but by expanding the money supply the West is destroying it fiat monetary base. 

Real economy - The production and consumption of actual goods and services rather than financial transactions.

Financial repression - Policies that reduce the real burden of debt, often through inflation and controlled interest rates.

Productive capacity - The ability of an economy to produce goods and services using its available resources.This piece is strongest if presented as a framework rather than a forecast. The central claim is not that financial assets will collapse, but that the relative valuation gap between financial claims and physical productive assets may narrow over the coming decade.

Civilisation - whatever you think is the unit of a society -  individuals, families. tribes... - culture is the glue keeping our society and civilisation together, and away from fragmentation, holding us together much like cement holds together the bricks in a wall. It is how the generations connect and is what we deem to be of worth to pass on to the next generation.

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