Investing.com – Commodities are tipped to be supported by positive economic growth and tight global supplies this year, according to analysts at Wells Fargo (NYSE:).
In a note to clients, the analysts led by Scott Wren argued that a commodity bull “super-cycle” — or sustained period of expansion — which they estimate began in March 2020 is “intact”, even as a lack of supply remains a “key issue” for the asset class.
However, Wren added that, overall, commodities “didn’t do a whole lot” in 2024. The asset class finished slightly less than 6% higher than where it started the year, Wren noted, citing the Bloomberg Commodity Total (EPA:) Return Index.
Returns were mixed in 2024, with the prices of items like soybean, corn, and wheat dropping, while gold soared by more than 27% and was little changed after a volatile year, Wren said.
Still, the Wells Fargo analysts are carrying a “favorable” rating of commodities, which means they are aiming to commit more funds to the asset class than their long-term strategic allocations might suggest, Wren said.
Backing this call were projected interest rate reductions by central banks around the world, which could support economic activity “through the second half of this year and likely beyond”, Wren wrote.
Analysis by Wells Fargo suggests that this growth will subsequently bolster global commodity demand later on in 2024, a trend which Wren argued presents “an opportunity for investors who are under allocated” to the asset class.
On specific sections of the asset class, the analysts have a neutral rating on the agricultural sector and see “more upside” to the price of gold in the new year.
