Commodities could soar after the Federal Reserve’s quarter-point interest rate cut this week, though this will depend on whether the U.S. manages to avoid a recession, according to JPMorgan. “Historically, commodities have generated positive returns both leading up to and following the first Fed cut,” JPMorgan analysts led by Natasha Kaneva told clients in a Thursday note. “However, the nature of the cutting cycle is crucial.” Commodities generate strong returns if the Fed cuts when economic growth is firm and inflation is on the decline, the analysts said. But they tumble if the cut comes when inflation is stubborn, growth is slowing, and a recession is imminent. Commodities rallied more than 15% nine months after the Fed cut rates in 1995 and 2024, periods with macroeconomic environments like the present, according to JP Morgan. But they tumbled 16% on average in 1998, 2001 and 2019 when the central bank cut rates as a recession seemed on the horizon. U.S. markets are pricing in a goldilocks scenario right now in which growth and inflation ease just enough to allow the Fed to cut rates, but not enough to trigger a recession, the analysts said. JPMorgan economists, however, do see a 40% chance of a recession, they said. Precious metals tend to respond the quickest to rate cuts, the analysts said. Industrial metals tend to lag precious metals. Energy, meanwhile, tends to stay relatively flat in the three months following a cut before trending more sharply higher or lower, they said.