Commodities could further edge higher as much as 40% and investors should allocate raw materials to their portfolio, according to JPMorgan Chase & Co.
According to strategists led by Nikolaos Panigirtzoglou, although allocations appear to be above historical high on commodities, however they are yet not overweight.
Commodities from oil to wheat reach record highs last month as Russia’s invasion of Ukraine lead to supply crunch. This also elevated global inflation and central banks globally to come out with tougher response with investors reshuffling weighting of assets between stocks, bonds and raw materials in their portfolios.
“In the current juncture, where the need for inflation hedges is more elevated, it is conceivable to see longer-term commodity allocations eventually rising above 1% of total financial assets globally, surpassing the previous highs,” the JPMorgan strategists wrote in a note.
All else being equal, that “would imply another 30% to 40% upside for commodities from here,” they said.
Commodities on a broader level surged this year with gains in energy, metals and crops. Among all gainers, Brent climbed more than 30% and hit its highest level since 2008 last month.
Glodman Sachs Group Inc. also remains bullish on raw materials as part of inflation hedge. Goldman warned in an April 7 note that a global copper shock was under way.
