Investing.com — UBS raised its allocation to industrial metals to overweight from moderately overweight, while cutting its energy stance to moderately overweight from overweight.
The move comes as UBS strategists see the recent pullback in base metal prices as an opportunity to add exposure, citing tight supply and strong structural demand across most metals.
“A steady rise in emerging market demand, global efforts to achieve net-zero CO2 emissions, climate change, and structural underinvestment across almost every sector should support commodity prices over the coming years,” UBS strategists led by Giovanni Staunovo said in a note.
Still, they warned that “near-term volatility may persist amid tariff uncertainty and economic growth risks.”
On energy, UBS said it continues to expect the reopening of the Strait of Hormuz and the restart of production to take time, which it said should keep the oil market tight and supportive for prices.
But even so, “the sharp drop in prices leads us to reduce our allocation from a risk management perspective,” the strategists wrote.
UBS kept its precious metals stance at moderately overweight, saying the sector has been pressured by stronger-than-expected U.S. economic data, higher real yields, a firmer dollar, and reduced market expectations for dovish Federal Reserve policy.
The bank said central bank demand, continued diversification away from the dollar, and global debt concerns remain structural supports, but noted the near-term backdrop “looks still skewed toward consolidation.”
Agriculture remained at moderately overweight, with UBS citing geopolitical and fertilizer-related risks that keep price risk tilted to the upside, along with the emergence of a La Niña-related weather pattern that the bank said favors lower average corn and soybean yields in the Americas.
Livestock was kept at neutral, with UBS expecting prices to “take a breather” for seasonal reasons, while noting that U.S. Department of Agriculture data shows ongoing tight fundamentals, including U.S. beef cow numbers at a 75-year low.
More broadly, the bank maintained a high stance on broad commodities, saying supportive macroeconomic conditions and commodity trend signals continue to indicate “an attractive risk-reward for the asset class.”
The bank kept an underweight position on Treasury Inflation-Protected Securities within its collateral portfolio, alongside a neutral duration view and a low allocation to risk premia strategies.