Markets are lifting in afternoon trade on Thursday with the benchmark S&P/ASX 200 Index (ASX: XJO) resting 105 basis point up at 7,337.
The big end of town is joined by Australian small caps today as well with the S&P/ASX Small Ordinaries Index (XSO) also up by 74 basis points.
Meanwhile, the S&P/ASX 300 Metals and Mining Index (ASX: XMM) is leading today with a circa. 3% gain, just ahead of the S&P/ASX 200 Materials Index (ASX: XMJ) and S&P/ASX 200 Resources Index (ASX: XJR).
The distribution of these returns feeds into why one broker is bullish on ASX shares rolling through 2022 and beyond.
Why is Macquarie bullish on ASX shares?
After reviewing the current state of affairs, investment bank Macquarie has urged its clients to tilt their portfolios towards domestic shares, particularly amid tensions in Europe.
It also recommends concentrating on resources stocks over industrials in preference, considering the macroeconomic climate that's driving up commodity prices.
Although, with commodity indices racing to multi-year highs in 2022, it mightn't come as a surprise. Brent Crude oil has surged 52% in the past 12 months whereas gold is still up 6% despite a sharp pullback recently.
Meanwhile, commodity-popstar lithium has still booked a 434% gain during the last year, and energy markets including coal and natural gas have secured triple-digit returns as well.
And let's not overlook agricultural and food-based commodities. Except for lumber, the entire 'ag-com' basket is trading well into the green.
Most recently that's been spurred on by Indonesia's decision to scale back RBD palm oil exports.
"The world's top producer [Indonesia] announced such a move in further effort to stabilise domestic prices, and authorities will assess local supply regularly," as calculated by Trading Economics.
There's talk such a move could add further pressure on agricultural commodities.
However, there are two sides to every trade. And as commodity prices surge, there's sure to be a long list of winners in 2022, Macquarie says.
Macquarie equity strategist Matthew Brooks said that "[e]asing lockdowns and more China stimulus should support commodities," in a note, cited by The Australian.
Fed tightening remains a headwind for growth and valuations, and we still think this headwind will be greater for Industrials than Resources.
We still think the war in Eastern Europe is positive for Australia and continue to see inbound interest in ASX stocks from global investors.
The strategist's outlook aligns with the current macro-thematic it seems, as ASX shares continue to shrug off pressures seen in European and US markets so far in 2022.
