Commodities Continued Rising Last Week, Topping Global Markets
James Picerno | Feb 14, 2022 09:00AM ET
A broad measure of commodities continued rising last week, delivering the strongest performance by far for the major asset classes, based on a set of ETFs for trading through Friday’s close (Feb. 11).
WisdomTree Continuous Commodity Index Fund (NYSE:GCC) rose 2.0% last week, extending a rally that began more than two months ago. The ETF is up 15% from its previous low on Dec. 1.
The fundamentals of supply and demand are providing the bullish backdrop for commodities. Nicholas Snowdon, analyst at Goldman Sachs) said:
“This is the most extreme inventory environment. It’s a completely unprecedented episode. There is no supply response.”
In the energy space, the threat of a Russian invasion of Ukraine is the critical factor at the moment. Amid a backdrop of rising demand that’s outpaced supply, adding the potential for disruption in Russian supply is pushing the price of crude closer to $100 a barrel. As The Wall Street Journal observes today:
“Russia is the world’s third-largest oil producer, and if a conflict in Ukraine leads to a substantial decrease in the flow of Russian barrels to market, it would be perilous for the tight balance between supply and demand.”
Most of the major asset classes fell last week. Only stocks the Emerging Markets Index Fund (NYSE:VWO) and inflation-indexed Treasuries (TIPS) posted gains along with commodities. Otherwise, red ink dominated weekly results.
The biggest loss last week was essentially a tie between US real estate (NYSE:VNQ) and foreign high-yield bonds (NYSE:IHY), with each ETF sliding roughly 1.7%.
The downside bias for assets last week took a bite out of the Global Market Index (GMI.F). This unmanaged benchmark, which is maintained by CapitalSpectator.com and holds all the major asset classes (except cash) in market-value weights via ETF proxies, lost 0.9% last week. GMI.F has fallen in five of the past six weeks.
Get The News You Want
Commodities continue to post the strongest one-year performance for the major asset classes. GCC is up nearly 25% over the past 12 months as of Friday’s close. That’s well ahead of the second-best one-year performance: a gain of 18.6% for US REITs (VNQ).
The biggest one-year loss is currently in foreign corporates: Invesco International Corporate Bond (PICB) has shed nearly 11% over the trailing 12-month window.
GMI.F’s one-year change is a modest 3.1% gain.
Reviewing markets in terms of drawdown reveals that the majority of the major asset classes are currently posting peak-to-trough declines that are below GMI.F’s drawdown, which is 6.5% at the moment.
The smallest drawdown at Friday’s close: inflation-indexed Treasuries via TIP, which has lost a relatively light 4.1% from its previous high.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.