![]() ![]() There are two indexes available for two population groups: a CPI for All Urban Consumers which covers approximately 93% of the total population and a CPI for Urban Wage Earners and Clerical Workers (CPI-W) which covers 29% of the population. Energy weight in the Consumer Price Index for All Urban Consumers (CPI-U). As of March 22, 2022.Ģ Source: Financial Times, “European industry braced for pain from latest surge in oil and gas prices.” As of March 7, 2022.ģ Source: Copper Development Association Inc., “Copper Drives Electric Vehicles.” As of June 2017.Ĥ Source: U.S. A negative growth shock could slow central bank appetite for rate hikes, decreasing the opportunity cost of holding gold in portfolios.ġ Source: Bloomberg. 8 We believe the precious metal could benefit in the case of a negative growth shock - an economic shock that decreases potential GDP caused by the rising commodity prices. Gold’s low-to-negative correlation to equities has been sought as equity volatility has increased in recent weeks. We are seeing sentiment towards gold strengthening as geopolitical uncertainty continues. Therefore, broad commodity exposures could provide a source of diversification against equity and bond volatility within a rising environment. For instance, precious metals and livestock are two commodities sectors that have been negatively correlated in the last 10 years 7. ![]() Moreover, commodity sectors typically have a low correlation to each other. 5 They have exhibited relatively low correlation to equities and bonds over time, adding diversification to multi-asset portfolios 6. On average, since 1997, commodities have historically outperformed the S&P 500 in the first 12 months after the beginning of a rate hiking cycle. Not only does energy make up 7.4% of this inflation gauge, but it also impacts the costs many businesses bear in producing goods and services in the economy. Notably, commodities like crude oil and natural gas are components within the energy portion of the Consumer Price Index, which measures inflation. We believe exposure to commodities could help hedge against inflation. required by an average internal combustion vehicle. On average, a battery electric vehicle uses 183 lbs. The metal is highly conductive and malleable. Copper, in particular, will be key to the low carbon transition. For example, we see persistent demand due to the vital role commodities play in renewable technologies, specifically metals such as copper, nickel, and aluminum. We see specific themes in commodities that could benefit from the transition to a low carbon economy. 40% of Europe’s natural gas is sourced from Russia the country is also responsible for 43% of global palladium, while Russia and Ukraine combined account for nearly 30% of global wheat exports. The current disruption in energy and commodity supplies could impact the inflation outlook significantly. Meanwhile, heightened geopolitical risk may be supportive of continued commodity strength. ![]() #ISHARE COMMODITIES DRIVERS#Structural drivers - such as strong demand from economies reopening from COVID-19 restrictions, localization of supply chains, and historical under-investment in commodity production - mean that the supply and demand mismatch could persist. Commodities, as represented by the S&P GSCI - a benchmark of 24 commodities in agriculture, energy and metals - is one of the top-performing asset classes year to date, up 34.52% through March 22 nd, outpacing all other asset classes 1. ![]()
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