Investors are too cautious when it comes to investing in commodities, and right now the world is in short supply of everything, says Goldman.
The last trading day of May is being marked by weakness in stocks and surging crude prices, climbing after the EU hammered out a partial ban on Russian oil imports after that country’s invasion of Ukraine four months ago.
As a team led by Goldman’s head of commodities research, Jeffrey Currie, explains, there are few alternatives out there for hedging macro risks as central banks hit the brakes to try and control inflation. Equities are now negatively correlated with inflation expectations, suggesting investors are even more worried about the risk to stocks and valuations.
“As we saw in gasoline markets in 2006, when investors appear after a period of scarcity and volatile prices, market participants — from refiners to manufacturers — begin to hoard the spare stocks as a hedge against future scarcity,” said Currie and the team. “Though muddled macro risks are more two-sided today than in the immediate aftermath of the invasion, now is not the time to shift expectations for commodities outperformance, in our view,” the Goldman team said.
Elsewhere, Federal Reserve Gov. Christopher Waller said Monday that half-point rate hikes will continue until inflation subsides. U.S. data ahead Tuesday includes a pair of home-price indexes for March and consumer confidence for May.
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