For decades, investors have relied on forecasts of economic growth, consumer demand and corporate earnings to identify winning investments. However, renowned financial historian and investment strategist Edward Chancellor argues that a far more reliable way to generate long-term returns is by studying the capital cycle—an approach that focuses on the supply side of an industry rather than attempting to predict demand. According to Chancellor, understanding how capital enters and exits industries can help investors identify opportunities that the broader market often overlooks.

In his book, “Capital Returns“, Edward Chancellor explains the investment philosophy employed by Marathon Asset Management in London between 2002 and 2015. The book advocates the capital cycle approach, arguing that investors can achieve superior long-term returns by focusing on industry supply dynamics and capital allocation rather than relying solely on demand forecasts.

Looking Beyond Demand

Traditional investing tends to revolve around estimating future demand. Investors spend significant time predicting sales growth, consumer spending patterns and economic trends. Chancellor believes this approach has limitations because demand is notoriously difficult to forecast with precision.

Instead, the capital cycle approach shifts attention to supply. It examines how much capital companies are investing, whether industry capacity is expanding or shrinking, and how these changes are likely to affect future profitability. Since supply trends are generally easier to observe than demand, they can offer a stronger foundation for long-term investment decisions.

How the Capital Cycle Works

Every industry experiences periods of expansion and contraction.

When companies earn high profits, they attract competitors and fresh investment. Existing firms increase capacity while new entrants join the industry. Over time, this excess investment creates oversupply, intensifies competition and puts pressure on prices and profit margins.

As profitability declines, weaker players exit the market, investment slows and industry capacity contracts. Reduced supply eventually restores pricing power and profitability, setting the stage for a new cycle of growth.

Investors who can identify these turning points before the broader market has an opportunity to benefit from improving fundamentals and attractive valuations.

Why Markets Often Miss the Cycle

Chancellor believes markets frequently fail to recognize changes in the capital cycle because investors focus excessively on short-term developments. Quarterly earnings, macroeconomic headlines and demand forecasts often dominate investment decisions, while structural changes in industry supply receive far less attention.
This creates opportunities for patient investors who are willing to look beyond near-term uncertainty and study how capital allocation is reshaping an industry’s competitive landscape.

Behavioural Biases That Influence Investors

The capital cycle approach also explains why investors repeatedly make similar mistakes.One common error is competition neglect, where investors underestimate how increased investment across an industry will eventually reduce profitability.

Another is base-rate neglect, where market participants focus only on current conditions without considering how past investment decisions continue to influence today’s returns.

Chancellor also points to narrow framing, where investors analyse companies in isolation instead of comparing them with similar situations across industries or history. Finally, extrapolation bias causes investors to assume current trends will continue indefinitely, even though business cycles are inherently cyclical.

Characteristics of Attractive Capital Cycle Opportunities

According to Chancellor, the most attractive opportunities are often found in industries where capacity growth has slowed, competition has become more disciplined and supply conditions are improving.

Industries with a limited number of rational competitors, high barriers to entry, sensible capital allocation and pricing discipline tend to generate superior long-term returns. Conversely, sectors experiencing aggressive capacity expansion or irrational competition often see profitability deteriorate over time.

The Importance of Management

A company’s management plays a crucial role in the capital cycle.

Strong management teams allocate capital prudently rather than pursuing growth for its own sake. Investors should evaluate how companies approach capital expenditure, research and development, acquisitions, debt management, share buybacks and equity issuance. Businesses that allocate capital efficiently are generally better positioned to create sustainable shareholder value throughout the cycle.

Why Long-Term Investors Have an Edge

One of Chancellor’s central arguments is that long-term investing works because there is less competition for information that remains valuable over many years.

While most market participants concentrate on quarterly earnings and short-term news, long-term investors can benefit by studying structural industry trends, capital allocation decisions and changes in supply dynamics. These insights often have a much longer shelf life and can produce superior returns over an extended investment horizon.

Key Takeaways for Investors

The capital cycle approach reminds investors that profitability is determined not only by demand but also by how much capital an industry attracts. Excess investment eventually destroys returns, while disciplined investment and shrinking capacity often lay the foundation for future profitability.

Rather than chasing popular sectors during periods of peak optimism, long-term investors should monitor supply trends, management quality and capital allocation decisions. By identifying industries where the capital cycle is turning in favour of stronger returns, investors can position themselves ahead of the market and improve the odds of generating sustainable long-term wealth.

Copper’s blistering rally to a record high in 2026 is beginning to reshape how manufacturers think about one of the world’s most critical industrial metals. As soaring prices threaten margins, companies are increasingly turning to aluminium, a cheaper and lighter alternative, for applications that have traditionally relied on copper.

The shift comes after copper prices surged to a record high in late January, touching nearly $15,000 per tonne, driven by supply shortages and surging demand from the green-energy transition and data centres. Aluminium, by comparison, trades at roughly a quarter of copper’s price, making it an increasingly attractive substitute where technical requirements allow.

The transition is no longer theoretical. Rising copper prices are prompting automakers and manufacturers to expand the use of aluminium wiring as a lower-cost and lighter alternative. Companies such as Ferrari and BMW are already increasing aluminium’s adoption across new vehicle models, underscoring how economics and engineering are converging to accelerate substitution.

Also read: Ferrari and BMW join Tesla, China in switch from copper to cheaper aluminium

The move has been driven by a widening price gap between the two metals. The copper-to-aluminium price ratio has climbed above 4.2, making aluminium a significantly more economical option for electrical wiring. Although aluminium offers around 61% of copper’s electrical conductivity, its cost allows manufacturers to reduce material pressures by using thicker aluminium cables wherever design requirements permit.

Weight has emerged as another decisive factor, particularly in electric vehicles. Copper is around 3.3 times heavier than aluminium, making the white metal an attractive option for improving vehicle efficiency and extending driving range without compromising functionality.
Ferrari introduced aluminium wiring in its 296 Hybrid sports car last year before extending its use to additional models, including the recently launched Luce electric vehicle. According to the company, the transition has reduced wiring weight by 15 to 20%. Ferrari’s Head of Research and Development, Dario Esposito, said the company selected aluminium primarily for its technical advantages and weight reduction rather than its lower cost.

Will the trend last?

Analysts at JPMorgan estimate the ongoing substitution will affect around 2% of global copper demand this year. Under one scenario, that figure could rise to as much as 6% by 2030 as forecasts for copper supply continue to fall short of demand projections for more than a decade.
According to an HDFC Securities report, the commodity bear market between 2011 and 2020 severely damaged the supply pipeline across the resource sector. Mining capex fell more than 40% from peak levels, oil and gas exploration spending stagnated, and ESG-related pressures further restricted new project development. Discoveries of new tier-1 copper, oil and gas deposits have effectively flatlined since 2015.

At the same time, demand has accelerated sharply. Electrification, artificial intelligence, defence spending and emerging market urbanisation are all deeply commodity-intensive trends. Structurally constrained supply, coupled with rigid long-term demand, typically pushes baseline market-clearing prices higher. According to the report, current conditions resemble the early stages of previous multi-year commodity cycles.

Read more: ‘Higher-for-longer’ aluminium cycle to lift producer stocks

Iran conflict troubles

The Iran conflict has added another layer of pressure to an already strained supply picture. One of the less-discussed drivers behind the recent rally is the growing shortage of sulfuric acid, a key input in copper extraction and refining, particularly in heap leaching operations. Nearly half of the world’s seaborne sulfur supply originates from the Middle East, and disruptions around the Strait of Hormuz have significantly tightened availability.

Chile’s changing copper production dynamics have further complicated global supply calculations. As the world’s largest copper producer, operational disruptions, water scarcity and the absence of major new high-grade discoveries have constrained output growth. This remains a critical variable as global supply chains struggle to keep pace with rising demand for energy transition metals.

Aluminium’s own rally

Even as aluminium benefits from copper substitution, the metal is increasingly showing signs of entering a powerful structural bull cycle of its own. According to a Bloomberg report in June, concerns among traders are rising that Chinese aluminium smelters may be asked to curb production as authorities intensify scrutiny of energy consumption and emissions across major industries.

Chinese smelters have been operating at full capacity amid a global supply shortage worsened by the Middle East conflict. Aluminium prices on the LME have climbed steadily since the war began in late February, with supplies from the region disrupted due to the effective blockade of the Strait of Hormuz.

Morgan Stanley said the medium-term demand-supply outlook for aluminium remains constructive, supported by strong sustainability-linked demand and constrained supply growth resulting from China’s smelter caps and slower capacity expansion elsewhere.

The brokerage added that near-term factors, including China’s supply discipline, disruptions in the Middle East and elevated energy costs, are likely to keep prices firm. It also pointed to favourable positioning on the global cost curve and low inventories outside the US as factors that could limit downside risks.

India push

Analysts also believe India is entering a multi-year growth cycle that is expected to drive robust demand for both aluminium and copper.
Morgan Stanley described aluminium as its preferred base metal, citing a tighter demand-supply balance. Supply growth remains constrained by China’s capacity caps, slower ramp-up in Indonesia due to power limitations and limited expansion elsewhere.

Recent disruptions in the Middle East have tightened markets further, with some supply losses likely to persist because of long restart timelines.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

Kuaishou Technology’s 1024 -0.09%decrease; down pointing triangle Kling has raised $2.80 billion from investors, as the short-video company seeks to spin off and list its artificial-intelligence video unit.

Venture capitalists and other investors have injected 19.04 billion yuan, or $2.80 billion, into Kling, Kuaishou said late Thursday. Additional investors could still join this funding round, potentially taking the total investment as much as $3 billion, it added. Kuaishou’s stake in Kling could fall to as low as 68.33% after the capital injection.

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Mutual fund performance often goes through cycles, with even well-established schemes experiencing periods of underperformance. While recent returns may attract attention, they do not always reflect a fund’s long-term potential. Evaluating a fund over a longer time horizon can provide a more meaningful picture of its overall performance.

A similar query came up during The Money Show on ET Now, where the host pointed out that Parag Parikh Flexi Cap Fund has recently underperformed several peers in the flexi-cap category, with many other funds beating their benchmarks. So why do advisors continue to recommend it?

Also Read | 11 equity mutual funds multiply lumpsum investments by 4x in 7 years. Do you own any in your portfolio?

Aditya Shah, Founder, Hercules Advisors explained why he believes investors should focus on long-term consistency rather than chasing short-term performance.

Shah said that the outperformance and underperformance are part of every mutual fund’s investment cycle, and no single fund can consistently outperform every year over a period of time. He said investors should avoid judging a scheme solely based on its recent returns and instead look at its performance over a longer period.

“What matters more is the risk-adjusted return,” Shah said. He noted that Parag Parikh Flexi Cap Fund has consistently ranked among the top two or three funds on a risk-adjusted basis and is likely to remain in the top quartile over a five- to ten-year period.
“Over a period of 5 to 10 years, Parag Parikh will be in the top five quartile and that is all that an investor really needs,” the expert said.He explained that every year, you cannot get a fund that is outperforming. Funds go through phases of outperformance and underperformance.

Shah also highlighted the fund’s large-cap bias as one of the key reasons behind his recommendation. According to him, investors with an investment horizon of around five years should prioritise controlling risk rather than chasing high returns from riskier segments of the market.

He said portfolios with a greater allocation to large-cap and mid-cap stocks tend to offer a better balance between risk and return over shorter investment horizons, whereas small-cap funds can be significantly more volatile.

According to the expert, “Over a period of five years, you cannot go into the market into the smallcap side of the market. You have to assume an orientation of a largecap and a midcap side of the market because a smallcap fund will have a higher risk.”

Also Read | Which is the best Nifty-based index fund to buy basis expense ratio and tracking error?

He further pointed out that despite their strong performance in earlier years, small-cap funds have struggled recently, demonstrating why investors should not assume that past winners will continue to outperform.

According to Shah, risk management should take precedence over return maximisation when the investment horizon is relatively short. Instead of chasing the best-performing fund every year, investors should remain invested in schemes with a consistent long-term track record and strong risk-adjusted performance.

The expert said that one should evaluate funds over complete market cycles rather than based on short-term returns. A temporary phase of underperformance does not necessarily make a fund a poor investment if it continues to deliver competitive long-term, risk-adjusted returns while keeping portfolio risk under control.

As per the data available on ACE MF, in the last six months, the fund lost 4.94% compared to a loss of 2.99% by the benchmark (Nifty 500 – TRI). In the last one year, the fund delivered a negative return of 2.43% against a marginal loss of 0.26% by the benchmark.

After delivering positive returns in the last three months, the fund failed to outperform its benchmark. The fund delivered a return of 4.87% against a return of 11.48% by the benchmark.

Over the longer horizon, the fund has delivered a return of 14.24% in the last three years against a return of 13.33% by the benchmark. In the last five years, the fund delivered a return of 13.85% compared to 12.62% by the benchmark and since its inception, the fund has delivered a CAGR of 17.50%.

Also Read | MF Tracker: Parag Parikh Flexi Cap Fund turns Rs 10,000 SIP to over Rs 51 lakh in 13 years. Too late to invest?

The database platform ACE MF further showed that on a monthly basis, the fund delivered best returns between March 24, 2020 to April 24, 2020 where it delivered 18.63% return against 17.74% by the benchmark. And the worst performance was between February 24, 2020 to March 23, 2020 where it lost 30.98% and the benchmark lost 37.16% in the same period.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@timesinternet.in alongwith your age, risk profile, and twitter handle

Millions of Americans woke up on the nation’s 250th birthday, July 4, and reached for their phones to check the morning Wordle before the barbecue got started. What they found was puzzle number 1,841, a five-letter word that immediately struck many players as a fittingly patriotic choice for Independence Day, even if its origins trace not to Philadelphia but to Naples.

The answer to today’s Wordle is PIZZA.

It is, by any measure, a perfectly themed solution for a holiday built around backyard cookouts, gatherings with family and friends, and the very particular American tradition of ordering takeout when the grill runs out of space. Pizza arrived in the United States with Italian immigrant communities in the late 19th and early 20th centuries, took root in cities like New York, Chicago and New Haven, and over the following century became so thoroughly embedded in American food culture that it now ranks among the most consumed foods in the country. An estimated 3 billion pizzas are sold in the United States every year, with the average American eating roughly 23 pounds of pizza annually. Its presence on the Fourth of July is about as inevitable as fireworks.

For Wordle purposes, the word is a reasonably tricky proposition despite its familiarity. PIZZA contains two vowels and three consonants, starts with P and ends with A, and crucially features a double Z at its center, a letter pairing that sits at the exact intersection of unusual and unfamiliar in the Wordle context. Most experienced players build their opening strategies around the most common Wordle letters, typically a mix from the group containing R, S, T, N, L, E, A and O. The letter Z, one of the least common in standard English usage, rarely appears in those opening frameworks. When it appears twice in five letters, the word becomes considerably more resistant to standard elimination strategies.

The most effective openers for today’s puzzle tended to be those that secured an early confirmation of the P, the I and the A, the word’s two vowels and its most distinctive consonant beyond the double Z. Starting words such as PHASE, IDEAL, PLANE or APRIL each gave solvers a meaningful foothold from which to reconstruct the word’s structure, particularly once the double-Z middle revealed itself through the process of elimination. Players who opened with standard vowel-heavy words like ORATE or RAISE found themselves with minimal useful feedback after the first guess, since none of the letters in those common openers appear anywhere in PIZZA.

The double Z specifically is the trap that likely cost the most streaks today. Wordle players who correctly identified the P as the first letter and the A as the last letter through their early guesses still faced an unusual challenge in reconstructing the interior, since a Z-Z combination does not appear in many five-letter English words and does not naturally surface as a guess even for players who know a word ends with the right letters. Experienced players often remind each other that repeated letters are more common in Wordle answers than intuition suggests, pointing to past answers including SHEEP, BLOOM and PUPPY as examples, but applying that principle specifically to Z requires a level of vocabulary recall that even regular players can stumble on.

The connection between today’s answer and the holiday on which it falls adds a pleasing layer of thematic resonance that has not gone unnoticed on social media this morning. The New York Times’ Wordle editing team, led by puzzle editor Tracy Bennett, has not confirmed whether the Independence Day placement was deliberate, but the combination of a universally recognized American food with a national celebration has generated the kind of enthusiastic online response that particularly satisfying or well-timed Wordle answers tend to produce.

Today’s puzzle is number 1,841 in the Wordle sequence, a milestone that speaks to how thoroughly the game has embedded itself in daily life since Josh Wardle created it in 2021 as a private project for his partner before it went viral globally in January 2022. The New York Times acquired it shortly afterward for a reported seven-figure sum and has maintained its core mechanics, free daily access and single-puzzle-per-day format throughout more than three years of operation under its editorial umbrella. Wordle now sits alongside Connections, Strands, Spelling Bee and the Mini Crossword as part of the Times’ suite of daily games products that have collectively attracted tens of millions of regular players.

For players whose streaks survived the double-Z challenge today, tomorrow’s puzzle arrives with a clean slate. For those who did not, the only consolation is that PIZZA is genuinely one of the more memorable, thematically appropriate and conversation-generating answers the puzzle has produced in its history, the kind of word that makes non-players smile when they hear it described and that reminds regular players why they keep coming back to a two-minute word game every morning, including on a national holiday when there are plenty of other things competing for their attention.

This article was written by

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in CADL over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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