Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
The king of electrification could be the crown commodity jewel in 2022
Ole Hansen
Head of Commodity Strategy
Summary: Looking ahead to the new year, we have asked the Saxo Strats what they will be looking at in the new year. In this article, our Head of Commodity Strategy, Ole Hansen, gives his view on whether the surging returns from last year can be followed up and gives his advice on where to look as an investor.
Looking back at 2021 it was the best year for commodities since 2000 with the sector rising by as much as 25 pct., so this of course begs the question can the positive development continue? And I think the answer to that question is, yes it can, but probably at a slower and more selective pace than what we saw in 2021.
There are a vast number of things that affect the commodity market. For instance, with the rise of inflation and interest rates, equities are under pressure, which usually wouldn’t be a positive sign for the commodity sector. But at the same time, we have an economy, which is extremely dedicated to a green transformation, which in whatever capacity you look at it will translate into rising demand for commodities, not least the so-called ‘green’ metals that needed for the transformation to be successful. Adding to that, weather concerns raising the cost of many food commodities and a continued strong demand for fossil fuels, like crude oil and gas, at a time when investments into the mining and oil production sectors are at the lowest in two decades.
So, there’s a lot of things that justify commodities as part of your investment portfolio. If you are new to the asset class, I would suggest looking at a broad-based commodity fund or ETFs which either spreads their exposure across all three sectors of energy, metals and agriculture, or some that primarily focus on energy and metals, which is where I see the biggest upside.
If you are more experienced in the asset class, or would like to take on more risk, I think metals in general and specifically copper is an interesting bet. Copper is the king of electrification and it is therefore a key part for the green transformation, so it is hard to see demand for the metal tumble anytime soon. The risky part is that copper’s value is also closely tied with the housing sector, which saw a drastic slowdown in China in 2021 with the Evergrande scandal – but the country’s sharp turn towards decarbonization are likely to offset most of potential loss in demand from a slowing property sector.
I also think oil is interesting for the reasons I mentioned above – I think there’s a chance the green transformation has skipped oil and gas as the intermediaries a bit too fast and – like the current energy crises suggest – we may as a result end up with undersupplied markets sometime soon.
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer