Commodities & Energy Sector

Gold prices might experience a correction or consolidation over the near term. However, cyclical and structural forces will ultimately cause the yellow metal to trend upwards.

The new national unity government in South Africa creates a geopolitical opportunity that investors should not bet against in the short term. A broad-based rally is likely to unfold relative to other emerging markets. However, structural problems and distrust within the new coalition hold out significant risks over the long run.

We close our overweights to Energy and Aerospace & Defense. The macroeconomic backdrop is deteriorating for Energy. As for A&D, the good news is already priced in.

European stocks have massively underperformed US ones since the GFC. Demographics and productivity say this trend will continue, but is that really so?

Generative AI-related rally resumed in May. Much of the recent market gains are down to excess liquidity that was begotten by the massive pandemic stimulus, creating a dichotomy between multiple economic challenges and exuberant markets. The Fed is unlikely to step in to prevent the bubble as it is currently more worried about the near-term downside for growth than financial stability.

The US economy is in the “Overheating” phase, so stronger growth brings higher inflation. Tight monetary policy means recession is still likely over the next 12 months. Stay defensive.