Four reasons to invest in commodities in 2018

Falling crude oil inventories, weaker US dollar provide investors in commodities reason for optimism

Time to read: 4 min

Commodity performance has been mixed in recent years. A strong rally in 2016 was followed by more modest returns in 2017, with gains in industrial metals offsetting weakness in energy and agricultural commodities. As we move into 2018, I believe conditions are favorable for commodities. Here are four reasons to take a closer look.

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What to make of the US dollar’s doldrums?

Today’s weak dollar has the potential to spark higher interest rates and ignite commodities

While the dollar moved higher against global currencies in 2014 and 2015, headlines touting the dollar’s strength continued long after its price trend flattened out. Since then, the Federal Reserve adopted tighter monetary policy, leading many market prognosticators to predict a renewed rise in the US dollar. I was not among them.

In fact, it has been my contention for nearly two years that

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Commodities: Time to buy when others are selling?

As outflows increase, oil fundamentals are strengthening

As I travel around the country to meet with institutional clients, I often hear this question: “What is everyone selling? Because that’s something I’m really interested in buying.” These are clients who have the confidence and experience to contradict the herd mentality that causes many investors to chase market returns (which often results in buying near market tops while selling near market bottoms).

That question is my cue to start talking about commodities. 

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Opportunities emerge as the ‘Trump trade’ unwinds

As the future of new policies becomes murky, investors seek opportunities that are grounded in today’s realities

The “Trump trade” has officially unwound in the global currency markets, reflecting investors’ fading confidence in Washington’s ability to pass growth-inducing legislation. After experiencing a post-election boost on the back of President Donald Trump’s victory late last year, the US dollar erased almost all of its gains as of May 17.1

While this week’s drop triggered dramatic headlines, my team believes that falling enthusiasm is creating an attractive entry point for investment opportunities based on real trends that we’re seeing today — not on inflated hopes for new policies.

The potential effects of a weaker dollar

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Commodities: Staying focused on the fundamentals

Despite recent market disruptions, a decline in global crude oil inventories could bode well for commodity investors

2017 has been challenging for commodities, which are down more than 9% on the year as of May 5, 2017.1 In the first week of May, commodity markets experienced heightened volatility in the wake of rising US crude oil output and expectations of a recovery in Libyan production. Copper and iron ore prices have also retreated on renewed concerns about Chinese demand.

Supply is critical to energy commodities

However, commodity investors need to look at

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