They’re loving commodities these days. The bonds, not so much.

“They” are fund managers. Specifically those polled by BofA for the April edition of Michael Hartnett’s ever popular monthly survey. But it’s not just them. A lot people like commodities in 2024, and particularly energy which, as I never tire of reminding readers, is as good a geopolitical hedge as any.

Marko Kolanovic agrees with that latter assessment. JPMorgan strategists led by Kolanovic this week shifted their commodities OW to favor more energy and less precious metals in light of the remarkable run gold’s enjoyed.

Kolanovic flagged the broken relationship between gold and US reals — the “great golden disconnect,” as I recently dubbed it. “Gold has had a strong run to record highs and recently disconnected from real yields, but could come under pressure if real yields continue to rise, while oil has upside risk on geopolitics,” he said.

For what it’s worth, a net 26% of the fund managers polled by Hartnett this month said gold’s overvalued, up 20ppt MoM and among the highest readings in a decade and a half.

Suffice to say some believe gold ran too far, too fast.

If you ask JPMorgan, reserve manager buying (i.e., China) can’t adequately account for recent gains. “We view the reserve manager buying as a longer-term phenomenon and attribute the recent rally to momentum traders and CTAs, given the jumps in the aggregate open interest in COMEX gold futures and the uptick in net managed money positioning which is at two-year highs,” Marko wrote.

For commodities more generally, professional investors upped their allocation by the most on record in April, according to the BofA poll.

The figure above shows a 20ppt increase. Fund managers are now a net 11% OW, Hartnett noted, the most in a year.

Needless to say, investors’ interest in commodities may have as much to do with inflation as it does geopolitics. An aversion to bonds speaks to that.

When I say “aversion” I actually mean “run for the hills.” The BofA poll showed a huge MoM drop in bond allocations.

As the chart shows, April’s pruning was the largest in over two decades and flipped fund managers to the largest net UW since November of 2022.

Guess who else is cautious on bonds? Marko.

“While higher yields will tempt investors to get long duration after missing the peak in yields last year, disappearing rate cuts eat into the upside, as we have been revising our yield targets higher,” JPMorgan’s team wrote, adding that “with markets pricing a later start to easing, even if we see Treasury valuation as cheap, we will not be looking to add US duration in the near-term.”

Notably, JPMorgan likes 5s30s steepeners. The rationale’s worth a quote. “Steepening trades can still work despite the challenge of current pricing, as the changing nature of demand towards price-sensitive buyers argues for a higher term premium,” the bank said.

The 5s30s steepener can work in two scenarios, they went on: A bull steepener should the Fed get forced into cuts or a bear steepener in the event growth and inflation continue to run hot, “pushing up term premia at the long-end to digest [an] uptick in Treasury supply.”