Bank of America (BofA) provided its outlook on various commodities, highlighting an overweight position on gasoline, soybean meal, lead, and copper.
The BCOM TR index, which tracks commodity returns, has reported a 5.64% yield so far in 2024, including a 3% month-over-month increase in January. Coffee, silver, and copper were the top performers, while natural gas, corn, soybeans, and wheat underperformed relative to the index.
BofA's analysis suggests a favorable short-term outlook for certain commodities, with positive roll yields expected over the next month for Brent crude oil, gasoline, and copper.
Looking at a longer-term horizon of six months, BofA's model projects positive spot returns for industrial metals, most agricultural commodities, and all energy sectors. However, cotton is expected to yield negative spot returns. The model also anticipates positive excess returns for soybean meal, Brent crude, gasoline, and gasoil.
The report also noted that the performance of metals and agricultural commodities continues to be negatively impacted by roll yields, with all metals except aluminum in contango at the end of January.
The contango situation, where future prices are higher than spot prices, was also prevalent in agricultural commodities, with a steepening of the curves noted. In contrast, most energy commodities, excluding gasoline and natural gas, were in backwardation, where spot prices are higher than future prices.
In terms of economic context, BofA remarked on the robust growth in the United States, fueled by strong consumer spending. This contrasts with China and Europe, which are showing signs of economic weakness.
The U.S. GDP is estimated to grow by 2.3% quarter-over-quarter in the first quarter, with the unemployment rate expected to hold steady at 4.1%. However, the bank cautioned that the current trade uncertainties and the use of tariffs by the U.S. administration could have mixed effects on commodity markets, potentially influencing them in both bullish and bearish directions.
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