According to a report in the Financial Times, global fund managers cut their commodity allocations to the lowest levels in three years due to concerns that the global economy will enter a recession and pessimism in China’s raw material demand outlook.
According to Ban of America’s “Monthly Global Fund Managers” survey for May, a net 3 percent of 247 fund managers who manage a total of $708 billion emphasized a “weak” outlook on commodities.
In the last 12 months, prices of many commodities other than gold, sugar and beef have fallen. The S&P Goldman Sachs Commodities total return index has dropped 27 percent from its highest level in almost eight years since June 2022.
Francisco Blanch, Commodity Strategist at Bank of America, said the commodity declines were due to a combination of rapid rises in US interest rates and mild economic sanctions against Russia’s war in Ukraine. In addition, data showing that economic activity in China has contracted also showed a factor reducing the interest in commodities.
In the news, it is stated that there is a slowdown in China’s economic growth and that the growth in the real estate sector is slowing down, while the Chinese government may take limited new measures to support economic growth. But there are also warnings that a major stimulus program could spark a new debt crisis.
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