In light of rising tariff risks, elevated inflation expectations, and stretched equity/credit valuations, Goldman Sachs outlines the strategic case for commodity investing. Far from being just a play on rare "supercycles," commodities can provide attractive long-term returns, portfolio diversification, and superior inflation protection — particularly during late-cycle phases or supply shocks when both equities and bonds tend to falter.
Key Points:
1️⃣ Returns Go Beyond Inflation ?
Commodity futures offer a "risk premium" for bearing price volatility.This premium supports positive long-term returns beyond just tracking inflation.2️⃣ Powerful Diversification Benefits ?
Commodities have low correlation to traditional assets in normal times.Correlation turns negative when most needed — during late cycles or disruptions.Direct commodity exposure is more diversifying than commodity producer equities, which track stock indices.3️⃣ Superior Inflation Hedge vs. TIPS and REITs ?
Broad commodity indices often outperform TIPS and REITs during inflationary periods.Commodities are more directly tied to price pressures and less sensitive to rising interest rates.Conclusion:
Goldman Sachs emphasizes that commodities offer a compelling long-term investment case, particularly in high-inflation, uncertain macro environments. They not only outperform traditional inflation hedges like TIPS and REITs but also enhance diversification and deliver an added return premium, making them a valuable strategic allocation in diversified portfolios.
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