JP Morgan says that if investors are scared enough to move into commodities as a hedge against inflation, that could move the entire commodity sector into record highs, Mining.com reported on Thursday.
Allocation to commodities with non-bank investors are above the post-Lehman average, but they’re not at an all-time high.
Let’s be honest, though, even if the allocations were at an all-time high, they’d still be low at 1% of total financial assets globally.
In times of such high inflation, investors are expected to look for safe haves, which they will likely find in the commodity sector, which will likely push the % of total financial assets globally above 1%.
With commodities already having rallied pretty aggressively this year, I will definitely be on the lookout for potential economic downturns, specifically in housing.
Let’s hope Menachem is not right about deflation because that could be painful for commodities. Though, I think it wouldn’t be painful for the commodities that I have exposure to (gold, silver, uranium).