GOLDMAN SACHS: 6 dangerous words are depriving many investors of returns from the hottest investment right now

oil rig

Commodities are the best-performing asset class year-to-date.
Even with a 50%+ recovery in oil over the past year, some investors are still skittish about the asset class.
“These are dangerous words from a risk-management perspective,” Goldman Sachs’ commodity strategists said about the justification they keep hearing.

Commodities are this year’s best-performing asset class, with crude oil continuing to recover after its worst crash in over four decades.

But the lingering impact of that crash is precisely why many investors are still nervous about diving in, to the dissatisfaction of Goldman Sachs’ commodity strategists. They’ve been overweight the asset class since 2016, and said in March that there was no better time in the past decade to invest in commodities.

“Surprisingly, markets remain complacent” Jeff Currie, the global head of commodities, said in a note on Wednesday. “Oil speculative net long positions have been declining since $73/bbl with the common manta, [sic] ‘we will ride this one out.’ These are dangerous words from a risk management perspective.”

Brent crude oil, the international benchmark, traded up 0.91% to $80 per barrel on Thursday, or nearly 10% above the level at which traders started paring bets that oil would rise. Brent has gained nearly 52% over the past year as some OPEC producers including Saudi Arabia implemented production limits more aggressively than expected. More recently, supply concerns mounted over Iranian oil as the US announced it was exiting the nuclear deal.

Currie and his team see Brent rising to as high as $82.50 per barrel. They raised their forecast for the S&P GSCI commodity index returns this year to 8% from 5%.

“This current rally has room to run, particularly from a returns perspective, as the current fundamental backdrop for oil is now more bullish than we had …read more

Source:: Business Insider


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