(Bloomberg) — Commodities might rise as much as 40% — taking them further into record territory — if investors increase their allocation at a time of rising inflation, according to JPMorgan Chase & Co.
Although allocations appear to be above historical averages for commodities, they are not heavily overweight, according to strategists led by Nikolaos Panigirtzoglou. This suggests there is room for gains in commodities, they said.
© JPMorgan
Commodities hit a record high last month as the Russian invasion of Ukraine roiled markets, sending prices soaring for everything from oil to wheat. This has contributed to fueling already high global inflation and a tougher response from the Federal Reserveprompting investors to weigh a new asset weighting between stocks, bonds and commodities in their portfolios.
“At the current juncture, where the need to hedge once morest inflation is greater, it is conceivable to see long-term commodity allocations end up exceeding 1% of total financial assets globally, surpassing record highs. above,” JPMorgan strategists wrote in an April 6 note. All things being equal, this “would imply another 30% to 40% increase for raw materials from now on,” they said.
Commodities have risen across the board this year, with gains in energy, metals and crops. Among the gainers, Brent crude — the global benchmark for oil — has risen more than 30% and hit the highest level since 2008 last month.
Among the major banks, Goldman Sachs Group Inc. it has also been consistently bullish on commodities, in part because of their role as an inflation hedge. Goldman warned in an April 7 note that a global copper crisis was underway.
original note:
JPMorgan Says Be Ready for 40% Commodities Rally in Market Shift
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