Citi's latest Quantitative Global Macro Strategy report maintains a bullish outlook on risk assets, with a particular emphasis on commodities, as financial conditions remain loose and economic growth shows resilience. The report highlights a strong performance in commodities, notably oil, which has surged due to recent sanction announcements and geopolitical risks. "YTD the stand-out performers have been in commodities where oil has rallied on sanction announcements and geopolitical risk," Citi analysts note.
The model continues to favor energy, adding base metals to its overweight positions, while maintaining a pro-risk stance in equities, particularly in the U.S. market. Despite a general sell-off in fixed-income assets, commodities have posted significant gains, with oil leading the charge. Citi's regime model suggests that loose financial conditions and subdued inflation will keep the outlook positive for equity risk, with U.S. equities moving back to an overweight position. As the global economic landscape evolves, Citi's strategy underscores the potential for continued strength in the commodities sector, driven by geopolitical developments and market dynamics.