BofA tips commodities as 2026’s bold contrarian trade, with energy in the crosshairs
A Bank of America strategy note argues the next big rotation could steer capital out of mega-cap tech and into hard assets, with energy poised to lead. For traders, a commodity upcycle would ripple through FX, rates and global equities—re-rating cyclicals and lifting commodity-linked currencies.
Why commodities, and why now
Bank of America’s Chief Investment Strategist Michael Hartnett says the macro regime is tilting back toward hard assets after years of tech leadership. With gold’s outsized gains showcasing renewed appetite for inflation hedges, he argues the setup could broaden across the commodity complex into 2026.
Hartnett’s case rests on a “hotter-for-longer” growth mix, sticky inflation impulses and underinvestment across traditional energy. He calls the out-of-favor energy complex the ultimate contrarian play, suggesting a strong year could make commodity charts “look like gold” by 2026.
Oil’s upside scenario—and what it implies
BofA’s bullish scenario maps a roughly 60% move in crude next year, which would put WTI near $96 per barrel. Such a rally would tighten financial conditions at the margin, nudge inflation expectations higher and complicate easing paths for major central banks.
For equity investors, an energy-led advance would favor value over growth, boost cash flows for producers and services, and potentially reflate cyclicals tied to capex and industrial activity.
FX and rates: who wins, who loses
- Commodity FX tailwinds: CAD and NOK typically benefit from higher oil; AUD can ride broader commodity strength if China demand holds.
- Importers under pressure: JPY and parts of EUR space may face terms-of-trade headwinds if energy spikes, especially into thin liquidity windows.
- Rates and the dollar: A commodity bid that lifts breakevens could keep U.S. yields firmer, supporting the dollar tactically—but a sustained global growth upshift might later aid pro-cyclical FX.
- Volatility: A rotation into commodities tends to raise cross-asset vol, widening FX ranges and repricing rate-cut timelines.
What could derail the call
Risks include a global growth wobble, rapid disinflation, stronger-than-expected OPEC+ supply, or a renewed surge in the U.S. dollar that tightens global financial conditions. A China slowdown that undercuts metals demand would also blunt the thesis.
Market snapshot
- BofA says commodities could mimic gold’s outsized gains by 2026 as hard assets retake leadership.
- Energy is singled out as the top contrarian trade heading into 2026.
- Oil bull case: a ~60% rally would put WTI near $96 a barrel.
- Potential FX impact: support for CAD/NOK/AUD; headwinds for JPY and parts of EUR bloc.
- Macro driver: a “hot” growth mix and persistent inflation pressures favor hard assets, according to BofA.
FAQ
What exactly is BofA calling for in 2026?
Bank of America’s Michael Hartnett argues commodities could be the standout contrarian trade in 2026, with energy leading a broader hard-asset rotation as the macro backdrop turns more inflationary and growth remains resilient.
Why could commodities rally after years of tech dominance?
Hartnett cites a regime shift: tighter supply across energy and metals, investment shortfalls in traditional oil and gas, resilient demand, and investors seeking inflation hedges after a long tech-led cycle.
How high could oil go under BofA’s bullish scenario?
The note sketches a roughly 60% advance that would take WTI near $96 per barrel, if supply constraints and firm demand align.
Which currencies stand to benefit most?
Commodity-linked FX—particularly the Canadian dollar (CAD), Norwegian krone (NOK) and Australian dollar (AUD)—historically gain when oil and base commodities climb.
Who could be hurt by a commodity spike?
Large energy importers like Japan may face terms-of-trade pressure, weighing on the yen (JPY). Parts of the euro area could also feel the pinch if energy costs climb sharply.
What are the main risks to the bullish commodities view?
A synchronized growth slowdown, faster disinflation, fresh supply from producers (including OPEC+), or a stronger dollar could cap or reverse a commodity rally.
How should traders position around this theme?
Investors often consider increasing exposure to energy and diversified commodity plays, and watching pro-cyclical FX. Risk management is crucial given higher volatility potential and policy uncertainty. As always, this is not investment advice; conduct your own research or consult a professional. Coverage by BPayNews.
Last updated on December 8th, 2025 at 04:26 am
