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Goldman Sachs urges investors to buy commodities now; expect stocks to suffer as inflation remains high

Global investment bank Goldman Sachs has urged investors to buy commodities now and worry about a recession later. The company’s analysts see commodities as “the best asset class to own later in the cycle, where demand remains above supply.” Meanwhile, “stocks may take a hit as inflation remains high and the Fed is more likely to surprise on the aggressive side,” Goldman noted.

Goldman Sachs Recommendation: Buy Commodities Now

Global investment bank Goldman Sachs has recommended that investors buy commodities. In a note titled “Buy Commodities Now, Worry About Recession Later,” published on Monday, Goldman wrote: “Our economists view the risk of a recession outside of Europe in the next 12 months as relatively low.” Company analysts including Sabine Schels, Jeffrey Currie and Damien Courvalin explained:

With oil a commodity of last resort in an era of severe energy shortages, we believe the downturn in the entire oil complex offers an attractive entry point for long-term investment.

In the US, Federal Reserve Chairman Jerome Powell said last week: “We are taking strong and swift action to moderate demand to better align with supply and keep inflation expectations anchored. We will continue this way until we are sure the job is done.”

Furthermore, European Central Bank (ECB) board member Isabel Schnabel noted on Saturday that central banks around the world are at risk of losing public confidence and must now act forcefully to combat inflation, including if you drag your savings into a recession.

“From a cross-asset perspective, equities may suffer as inflation remains elevated and the Fed is more likely to surprise on the aggressive side,” Goldman analysts further noted, explaining:

Commodities, on the other hand, are the best asset class to own later in the cycle, where demand remains above supply.

The final phase of the cycle normally implies an increase in inflationary pressures and an economy that exceeds the maximum rate of economic growth.

Goldman Sachs also warned: “We recognize that the macroeconomic environment remains challenging and the US dollar could rise further in the near term.”

Currie, who heads commodity research at Goldman Sachs, believes recessions are a natural part of a prolonged commodity supercycle. He told Reuters in November last year: “We expect a structural bull market in commodities, very similar to what we saw in the 2000s or 1970s.”

The analyst told CNBC in June that we are at the start of a commodity supercycle. “This is the first round of a commodity super cycle, it’s not just oil and gas, it’s metals, it’s mining, it’s agriculture, because the sector has suffered from over a decade of underinvestment,” he said.

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Bank of America: 90% of respondents plan to buy cryptocurrencies in the next 6 months

Despite bearish market sentiment, most cryptocurrency holders plan to buy “some amount of crypto” before the end of the year.

A new Bank of America survey shows that interest in cryptocurrencies remains high among Americans, with more than 90% of respondents saying they plan to buy cryptocurrencies within the next six months.

According to Jason Kupferberg, an analyst at Bank of America, the survey was conducted on June 1, after the collapse of Terra Luna. The sample size was 1,000 US adults.

In an interview with CNBC’s ‘TechCheck’, Kupferberg added that the percentage of respondents looking to buy cryptocurrencies was similar to the number they said they bought during the first six months of 2022.

Bitcoin adoption and payments

Regarding the use of Bitcoin and other cryptocurrencies, the bank says that adoption is not very pronounced.

However, with more movement towards payments tied to cryptocurrencies such as Coinbase’s Visa card, connecting with merchants and users is much simpler and more useful to bring new impetus to the industry.

Bank of America also says that the cryptocurrency market is unlikely to see a major shift in the global adoption of many cryptocurrencies and cryptocurrency exchanges. Comparing it to the dot-com era, Kupferberg says it is very likely that some of the projects will die out, before those that survive have wider adoption.

Stock and BTC price correlation

The BofA analyst also noted that Bitcoin remains highly correlated with equities, especially high-growth tech stocks. This lock trade has the price of BTC falling along with market downturns, trending towards a bear market as major stocks sell off.

On Monday, the price of Bitcoin dropped nearly 18%, with negative headlines about the Celsius Network compounding the downward pressure. The BTC/USD pair dropped to a 24-hour low of $22,725.