Wall Street bank warns of commodity price surge

JPMorgan Chase says commodities could rise in price by 40% should investors boost their allocation to raw materials at a time of rising inflation. According to Bloomberg, the bank’s strategists said that while allocations appear to be above historical averages on commodities, they are not very overweight.

That suggests scope for gains in raw materials, the strategists wrote in an April 6 note seen by the media outlet.

“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,” they said. All else being equal, that “would imply another 30% to 40% upside for commodities from here.”

Commodities have been trading at multi-year highs recently as financial sanctions on Russia, a major exporter of commodities, disrupted shipments and worsened the supply shortage. Soaring prices on everything from crude oil to wheat have spurred already-elevated global inflation, prompting investors to weigh reshuffling of assets between stocks, bonds, and raw materials in their portfolios.

The Russian government announced last month it was banning the export of certain commodities and raw materials to ensure the nation’s security amid Ukraine-related sanctions.

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