The case for commodities

An allocation to commodities is sometimes considered for building portfolios in times of high inflation. However, they are a volatile asset class. Here, the multi-asset strategy team considers the outlook for the asset class.

Market Updates 15 Jul 2022 2 min read
Authors
Evan BrownLucas Kawa

Highlights

  • Commodities and commodity-linked equities were among the few standout performers in the first half as inflation disrupted most asset classes.
  • Positioning in these assets has been curbed recently due to growing fears of a recession.
  • However, commodity-linked assets remain attractive, as these exposures remain inexpensive and we believe sentiment has deteriorated much more than fundamentals.
  • In our view, global economic activity is decelerating but not yet contracting, and supply growth in commodities is likely to remain constrained in the near term.
  • Importantly, Chinese growth is picking up as developed-market activity moderates.

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