Commodities will lag behind equities, bonds and credit markets over the next three months before a rebound in oil sparks a recovery, according to Goldman Sachs Group Inc.
The bank cut its near-term outlook for raw materials to “underweight”, predicting losses of 10 percent, compared with a 0.4 percent return for stocks, its top pick. Commodities will leapfrog equities as the best performing asset class over 12 months, returning 10 percent, according to a Jan. 27 report.
The Bloomberg Commodity Index slid to a 12-year low this week, with crude, hogs and copper leading losses in 2015. Inventories are rising after a decade-long bull market spurred farmers, miners and drillers to increase production. A strengthening dollar and falling energy prices are threatening to prolong the rout as they make it cheaper to produce more.
“Despite the large declines in commodity prices, we see risks as still skewed to the downside over the near term,” Goldman strategists and analysts including Jeffrey Currie, Christian Mueller-Glissmann and Peter Oppenheimer wrote in the research report. “Lower oil prices are also driving cost deflation across the broader commodity complex.”
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