2024-08-29 14:17:00 +0300

Need to Know: This asset class is poised to rise 38% because markets overestimate risk of global recession, Goldman says

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MarketWatch
By Barbara Kollmeyer

Still reeling from Fed Chairman Jerome Powells higher-for-longer remarks last week, riskier asset like equities look set for another battering, on Monday.

Youcant have the stock market collapse over 5% on the words of one man, grumbled FWDBONDS chief economist Chris Rupkey, who sees a major credibility problem for the central bank. Fed officials set the inflation fire ablaze with too much QE and now they say they know what to do now that inflation is out of control. No one believes that.

And as we head into the worst calendar month for Wall Street, economists expect more hawkishness out of the Fed, and say a strong jobs report on Friday will only shore up rate-hiking resolve.

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So where are the havens? Dividend stocks, the front end of credit markets and Latin American currencies and bonds are just some of the suggestions floating around.

Our call of the day from Goldman Sachs offers another. They see a buying opportunity via a recent soft patch in commodities and reduce risk elsewhere. They see equities threatened by sticky inflation and a potentially hawkish Fed surprise.

Commodities are the best asset class to own during a late-cycle phase where demand remains above supply. Physical fundamentals signal some of the tightest markets in decades, said a team led by senior commodities strategist Sabine Schel in a new note.

Goldman Sachs

The recent pullback in agricultural and industrial commodities was due to a global recession being priced in by traders. Recession fears have had more of an impact on commodities than on any other asset class, Goldman said. However, the bank believes a recession will be mostly confined to Europe, with the U.S. and China avoiding one.

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