Investors should flock into commodities for the next few years as they benefit from global geopolitical and macroeconomic turmoil, according to Bank of America’s Michael Hartnett.
Stocks would be replaced by commodities as the biggest winners of the “anything but bonds” trade for the rest of the 2020s as investors seek protection against risk, inflation and a weaker dollar, the strategist wrote. Fiscal excess means that the next few years are “more likely to see bear market rallies in government bonds, but no bull market.”
War in the Middle East and the artificial intelligence race have led to a heightened focus on supply chains, as governments seek to limit the fallout for industry and consumers from soaring prices for energy and other natural resources, and try to secure critical minerals, such as rare earths, that are essential for manufacturing and technology.
The Bloomberg Commodity Index has climbed 35% since the start of 2025, more than double the return of the S&P 500 over the same period. Treasuries have gained less than 7%. Crude oil, in particular, has soared this year as Iran closed the Strait of Hormuz to most shipping following the outbreak of war, while metals from gold and silver to copper were already benefiting from tailwinds such as central bank buying and the AI infrastructure boom.
The fundamental winners in the latter half of the decade would be led by commodities over the dollar, and international and small cap stocks over US and large caps, according to Hartnett. Geopolitics was being driven by the “need to monopolize commodities,” he said. “Who owns the chips, rare earths, minerals, oil, wins the AI war.”
In the short-term, the BofA team favors long yield curve steepeners as central bank rate hikes are priced out, and Chinese tech as tension with the US eases. It is also long consumer stocks and chips to play the political focus on the cost of living and continued spending by hyperscalers, so long as they are “happier to raise debt and cut jobs than blink in the AI capex arms race,” Hartnett added.
Stocks are set for a record year of inflows in a market seen as “too big to fail” by policymakers whose actions have reversed “Wall Street bears and corrections” since the global financial crisis, he said. Equities have seen $275 billion of inflows year-to-date, a trend Hartnett sees continuing except in the case of a major policy failure like a dollar or bond collapse, or a major credit event.
Written by: Rose Henderson — With assistance from Jan-Patrick Barnert @Bloomberg
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