Commodities enjoyed an impressive start to 2019. The S&P GSCI was up 9.0% in January, while the Dow Jones Commodity Index (DJCI) was up 5.4%. The strong performance was largely driven by a notable recovery in petroleum prices, but industrial metals also enjoyed a revival. Oil prices recovered strongly over the first full trading week Read more […]
Many news headlines point to rising or falling Chinese demand growth as a main influence of commodity performance. However, there are many other fundamentals like the U.S. dollar and interest rates that drive commodities. Even in the Chinese market, there are forces besides demand growth like demand for storage and demand for metals to be used as financial Read more […]
Commodities have faced many headwinds this year from the strong U.S. dollar, high supply from OPEC and the slowing Chinese demand growth. The S&P GSCI Total Return hit a 15 year low in August, 23 of 24 commodities dropped in July and the 3rd quarter was the 3rd worst in history. For the year, all sectors are negative and Read more […]
Now that negotiators have reached a deal aimed at reining in Iran’s nuclear program, Iran may get relief from some sanctions that may allow it to raise oil output. Though it could take time for supply to come onto the market, it depends on how long it takes for the International Atomic Energy Agency (IAEA) to verify Read more […]
There are no conclusive definitions of an asset class or definitive lists of asset classes, but asset allocation depends on how one chooses to define asset classes that collectively form the opportunity set. A company owned by Morningstar called Ibbotson Associates together with PIMCO pulled together some research on the topic that I think is interesting. They present a Read more […]
The oil price drop has precipitated a flurry of interest around enhanced oil indices since the benefits of enhancing rolls in energy are well understood from the obviously costly storage situations in oil. Below is a chart of the ten year cumulative return of the S&P GSCI Crude Oil Total Return versus the S&P GSCI Crude Oil Enhanced Total Read more […]
So far this year, we have seen a ravenous interest from U.S. investors in currency-hedged equity exposure. Currency risks have increased; currency volatility is on the up: The reasons behind these trends can be understood in part via the nature of human psychology and power, and the reality of politics. Consider yourself, for a brief Read more […]
Six months ago, commodities looked like they were on the brink of a comeback. The S&P GSCI Total Return gained 7.4% YTD through June 20 at its high. Back then, almost a record number of commodities, 12, were in backwardation, reflecting shortages in Brent Crude, Cocoa, Copper, Corn, Cotton, WTI Crude Oil, Feeder Cattle, Gold, Live Cattle, Natural Gas, Soybeans and Unleaded Read more […]
After much economic activity this week, the Fed announced inflation moved “somewhat closer” to the objective and is showing signs of firming after running below its 2% target for the past two years. In the last June report from the United States Department of Labor, food prices continued to increase although at a slower pace and unleaded gasoline prices had Read more […]
I fear the risk premium for agriculture and livestock may vanish sometime soon as climate change and El Nino drive up food prices. When investing in commodities as an asset class there are five components of return to be earned by using futures. While each component’s contribution to performance varies through time depending on the Read more […]
