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Buy commodities now, worry about recession later,” Goldman Sachs analysts wrote on Monday, arguing most recession risks battering global markets are overblown in the near term and recent declines in raw material prices offer a great entry point.

“Equities could suffer inflation stays elevated and the Fed is more likely to surprise on the hawkish side,” but commodities are “the best asset class to own during a late-cycle phase where demand remains above supply,” according to the Goldman team led Sabine Schel and Jeff Currie, as physical fundamentals “signal some of the tightest markets in decades.”

The recent pullback in agricultural and industrial commodities was due to a global recession being priced in by traders, but Goldman’s economists see the risk of recession outside Europe in the next 12 months as “relatively low.”

“With the risk of inventory exhaustion significantly greater than the risk of an imminent global economic recession in our view, we believe commodity index backwardation should steepen,” the analysts wrote, referring to futures prices tied to a specific commodity trading higher than the current spot price.

Among commodities, Goldman sees petroleum products likely leading the next move higher given the upcoming maintenance season, and “we believe the pullback in the entire oil complex provides an attractive entry point for long-only investments.”


Goldman analysts also said European gas prices have “overshot fundamentals,” partly due to very low liquidity.

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