According to JPMorgan Chase, if investors increase their allocation to raw materials at a time when inflation is growing, the price of commodities might jump by 40 percent in value. According to Bloomberg, the bank’s strategists said that, although allocations to commodities look to be above historical norms, they are not significantly overweighed in the sector.
The strategists stated in an April 6 letter, which was obtained by the media source, that this signals potential for increases in raw commodities.
It is possible that longer-term commodity allocations would ultimately rise over 1 percent of total financial assets worldwide, exceeding past highs, according to the authors, given the present environment in which inflation hedges are increasingly important. Assuming all other factors remain constant, this “would suggest another 30 to 40% increase in the price of commodities from here.”
Commodities have lately reached multi-year highs as a result of financial restrictions imposed on Russia, a key commodity exporter, which have interrupted shipments and exacerbated the supply deficit. Increasing costs for everything from crude oil to wheat have exacerbated already-high global inflation, causing investors to consider rebalancing their portfolios between equities, bonds, and raw commodities to combat the trend.
The Russian government said last month that it would prohibit the export of some commodities and raw resources in order to protect the country’s security in the face of sanctions connected to the Ukraine.