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The outlook for commodity markets may be brighter than many investors appreciate, given recent price action and the current state of the global economy. Recession risk is on the rise, to be sure, but for those with longer-term horizons who can look through near-term volatility, our models at Rosenberg Research are saying that now is a good time to add exposure.
From cyclical tailwinds such as a weaker U.S. dollar to depressed investor sentiment and positioning (which are contrarian positives) and structural demand-supply imbalances, there are good conditions for commodities over the medium term.
The fact that prices are close to cycle lows (the Bloomberg Commodities Spot Price Index is down 29 per cent from its peak in mid-2022, bringing valuations to near rock-bottom levels) is a clear sign that there is excessive pessimism “in the price.” Additionally, commodities are a great diversifier, and that just adds to our conviction.
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