Overweight on commodities, bullish on metals – how Saxo’s global markets experts see 2024 panning out.

The keyword for global equities in 2023 was economic resilience. Everything was set for a recession in the US amid the steepest interest rate increase in decades. However, unprecedented US fiscal policy – and the animal spirits unleashed by the mesmerising proficiency of Artificial Intelligence (AI) tool ChatGPT – helped the US economy avoid a recession, and propelled technology stocks to all-time highs. The main concern in 2024, nevertheless, is the possibility of a recession stateside, and its potential effect on the rest of the world.

Economists predict a 50 per cent likelihood of a US recession, underscoring the challenge for investors as they set their strategy for 2024. China’s policy resolve is also still a big unknown after another year of disappointment for Chinese equities – particularly in comparison to countries such as India, Mexico, Brazil and Vietnam, which have benefited from the post Covid-19 fragmentation of supply chains. Chinese equities have underperformed other key emerging markets by almost 44 per cent in USD terms since early 2018, and Saxo expects this trend to continue in 2024. 

Across equity themes, Saxo believes the ongoing commodity super cycle – driven by global urbanisation trends, green transformation investments and constrained supply – will push the sector to new heights in 2024. If the market accelerates its bets on more central bank rate cuts this year, the battered green transformation stocks across wind, solar, energy storage, electric vehicles (EVs) and hydrogen could likewise see a short-term boost. Cybersecurity and defence stocks are also likely to continue benefiting from ongoing geopolitical tensions, but we suggest exercising caution with the “Magnificent Seven” tech stocks – AI hype has rendered the US equity market dangerously over-concentrated, leading Saxo to be underweight US “mega caps” in 2024. Instead, Saxo prefers equal-weighted equity indices, in addition to minimum volatility and quality factors.


Peter Garnry of Saxo. Image: supplied.


Year of the metals

Diving into specific commodities, Saxo believes the new year could mark the “year of the metals,” with a focus on gold, silver, platinum, copper and aluminium. In precious metals, we believe the prospect of lower real yields and a reduction in the cost of holding a non-interest paying position will support demand, especially through exchange-traded products, where investors have been net sellers for the past seven quarters. Industrial metals also stand to benefit from supply disruptions, industry restocking as funding costs fall, and continued demand growth in China offsetting the rest of the world’s weakness. This will, not least, be driven by the green transformation, which will keep gathering momentum in 2024 – in some cases replacing demand for copper and aluminium from traditional end users, who could suffer from a weakening economic outlook.

Copper remains Saxo’s preferred industrial metal for 2024 due to expectations of robust ongoing demand, as seen in China over the past year. The so-called “king of green metals” (due to its multiple applications) has also suffered major supply disruptions in the recent past, most notably the government-enforced closure of the First Quantum-operated Cobre Panama mine in Panama. Other mining companies such as Rio Tinto, Anglo American and Southern Copper have also made production downgrades, primarily due to escalating challenges in Peru and Chile. Overall, these incidents paint a picture of a mining industry challenged by rising costs, lower ore grades and increasing government intervention – which may combine to boost the price of copper in 2024. However, given the wide range of challenges that mining companies will face in the coming years, such as those outlined above, we prefer direct exposure to the underlying metals through Exchange-Traded Funds (ETFs).


Ole S. Hansen of Saxo. Image: supplied.


New opportunities in 2024

The 2024 investment landscape is complex and challenging, presenting investors with a multitude of risks and uncertainties – not least in the geopolitical space, where the rise of populist sentiment in an election-heavy year (there will be elections in 2024 in the US, UK, Mexico, Indonesia, India, South Africa, the European Union and more) could prove pivotal. However, a bullish commodities outlook may serve the commodities-heavy Australian equity market well in 2024, given the ASX’s strong representation of iron ore, oil and gas, gold, copper and lithium companies – notwithstanding the potential for declining Chinese demand in iron ore and continued lithium oversupply. As always, investors should seek to diversify across markets, sectors and asset classes to ensure they capitalise on new global opportunities where they arise, and protect their wealth in more difficult times.

Peter Garnry is Saxo Head of Equities Strategy, and Ole S. Hansen is Saxo Head of Commodities Strategy. Peter and Ole are both based in Copenhagen.

Disclaimer: Saxo Capital Markets (Australia) Limited (Saxo) provides this information as general information only, without taking into account the circumstances, needs or objectives of any of its clients. Clients should consider the appropriateness of any recommendation or forecast or other information for their individual situation.  

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