Energy commodities could outperform US equities

The two asset classes that we track which have seen by far the most action since the last edition of the Asset Allocation Chart Book on 5th August are US equities and energy commodities. Not only have they been the best and worst performers respectively over that period, they have also seen the two largest moves in the past week, albeit now in the same direction. (See Chart 1.) While both share many of the drivers common to most “risky” assets, the fact that markets for other risky assets have been so quiet of late suggests that these common drivers have played little role in the big recent moves. Instead, the moves mainly reflect factors specific to each – namely the further rally, and then pullback, in tech stocks for US equities, and concerns about the longer-term outlook for demand for energy commodities.