BofA Hartnett: The commodity bull market will last for years, "Whoever controls the resources will win the AI race"!

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Michael Hartnett, Chief Investment Strategist at BofA Securities, believes: Against the backdrop of geopolitical turmoil and the AI arms race, commodities will replace stocks and become the biggest winner in the "everything except bonds is buyable" trade for the remainder of this decade, with the bull market expected to last for several years.

Hartnett points out that investors should allocate heavily to commodities in the coming years to hedge against risks, inflation, and pressures from a weakening dollar. He also warns that excessive fiscal expansion means government bonds are more likely to see bear market rallies, and a true bull market is hard to sustain.

The underlying reason is that the core of geopolitical competition has evolved into monopolistic demand for commodities: "Whoever controls chips, rare earths, minerals, and oil will win the AI race."

This judgment has already been confirmed in the market. The Bloomberg Commodity Index has surged 35% since the beginning of 2025, more than double the rise of the S&P 500 Index in the same period. Ongoing conflicts in the Middle East and the AI arms race are reshaping global supply chains, driving up prices of critical resources such as energy and metals.

AI Competition and Geopolitical Conflicts Boost Commodities

Hartnett attributes the current structural rise in commodities to a fundamental shift in the global geopolitical landscape. He states that the core of geopolitical competition has become "monopolistic demand for commodities," and summarizes this logic succinctly:

"Whoever controls chips, rare earths, minerals, and oil will win the AI race."

The spread of wars in the Middle East has directly impacted the global energy supply structure. After the outbreak of war, Iran blocked the Strait of Hormuz, causing many vessels to be unable to pass, and crude oil prices have soared significantly this year.

Meanwhile, metals like gold, silver, and copper have already benefited from ongoing central bank purchases and strong demand stemming from the AI infrastructure boom, with multiple favorable factors combining to drive a broad rally in the commodity market.

Governments worldwide are accelerating supply chain security arrangements and fiercely competing for critical mineral resources such as rare earths—essential for manufacturing and tech industries—to protect domestic industries and consumers from surging energy and natural resource prices. This trend further reinforces the long-term value of commodity allocation.

The Second Half of the Decade: Commodities Lead Asset Rankings

Looking to the latter half of this decade, Hartnett believes the asset performance landscape will undergo a profound shift. In his core ranking, commodities will outperform the US dollar; international stocks and small caps will beat US stocks and large caps, becoming structural winners.

Long-term inflation pressure brought by fiscal expansion is a major support for this judgment. Hartnett clearly states that in the next few years, government bonds are more likely to undergo technical rebounds within a bear market, rather than a genuine bull market, which will drive funds seeking real returns to continue migrating toward anti-inflation assets such as commodities.

As for short-term strategies, the BofA team is currently bullish on yield curve steepening trades, betting that central bank rate hike expectations will gradually be digested; they are also bullish on US consumer and chip stocks, reflecting policymakers’ sustained focus on cost-of-living issues and hyperscale cloud providers’ continued AI arms race investments.

Stocks Remain Favored but Their Position Is Being Diminished

Although the outlook for commodities is brighter, Hartnett is not bearish on stocks. He notes that the stock market is on track to set a historic record for fund inflows this year—$275 billion in net inflows so far since the start of the year, and this trend is expected to continue.

The stock market is considered a "too big to fail" asset because, since the global financial crisis, persistent intervention by policymakers has repeatedly resolved "Wall Street’s bearish sentiment and market pullbacks."

Hartnett says that unless a major policy mistake occurs (such as a collapse in the US dollar or the bond market, or a large-scale credit event), the pattern of ongoing inflows into the stock market is unlikely to reverse easily.

However, in his asset allocation framework, stocks have fallen from the "optimal choice" to second place, giving way to commodities. Behind this judgment is a systematic forecast of the inflation center rising, the dollar weakening long-term, and an intensification in the global competition for resources over the coming years.

Risk Disclaimer and Limitation of LiabilityThe market has risks, investments require caution. This article does not constitute personal investment advice, nor does it take into account the particular investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article suit their specific circumstances. Investing based on this information is at your own risk. ```