Commodities & Energy Sector

President Trump’s victory has injected a dose of uncertainty into the outlook for commodity markets. Most notably, the new administration’s energy policies are likely to be part of the early agenda. Changes in US domestic and foreign policies will also impact the outlooks for gold and industrial metals.

In this Strategy Report we highlight the likely consequence of Trump’s election on the major commodities.

Can Powell achieve a soft landing? There are some indications he is doing it. We examine why our negative stance was wrong and analyze the four growth engines that kept recession at bay. Half of these forces remain while the other half have run out of juice. While this might be enough to keep the economy going, we maintain our defensive positioning. Equities have priced a very benign outcome. Meanwhile, rising rates in anticipation of a Trump win are pushing the economy away from the soft-landing path. We hedge the possibility of further upside in yields in case Trump gets elected by downgrading duration to neutral.

Germany’s economy has lagged that of the rest of Europe for nearly 10 years. So have German stocks. Investors are extrapolating these trends to bet on the country’s deindustrialization. Could Germany manage to beat dismal expectations?

The global political system is destabilizing and the US will turn more hawkish in foreign policy, trade policy, or both, regardless of the election outcome. Tactically go long the dollar.