I often wonder at Goldman analysis. It is the most complex and arcane in the investment bank market, as if speaking Zwahili is more important to the bank than substance. No better example comes today from its late cycle bullish call on commodities:
Robust late-cycle growth is depleting global supply chains, creating increasing positive carry. As inflationary concerns push interest rates higher, cross-asset correlations with commodities decline, and the diversification benefits rise with higher rates. Rising geopolitical and trade policy risks only add to the inflationary mix in commodities.
1. The weak returns of the past decade are behind us. The global economy was operating below capacity in the ‘recession/recovery’ phase for over a decade and any early-cycle playbook warns of the poor returns in commodities when the global economy has slack in the system. Today it is operating near or above capacity.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
