Commodities increased slightly in March as positive fundamentals and heightened macroeconomic risk supported returns, according to a report by Credit Suisse.
Nelson Louie, global head of Commodities in Credit Suisse’s Asset Management business, said: "Commodities were driven largely by fundamental factors in March, and returns were generally uncorrelated with other asset classes. The key themes continued over from January and February, and were largely related to one-off event-driven risks which negatively impacted supplies. While weather risks seem to be subsiding in North America with the end of the winter season, the risk of further extreme climate events in South America and other parts of the world are still possible. In addition, heightened macroeconomic risk in Ukraine, and in other developing countries, most notably China, may continue to impact economically sensitive commodities."
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
Christopher Burton, senior portfolio manager for the Credit Suisse Total Commodity Return Strategy, said: "In the US, monetary policy is expected to finally be on the path towards normalization. Federal Reserve Chair Yellen has begun her tenure by indicating quantitative easing was nearing its end and surprised many by indicating rates may be raised shortly thereafter. As monetary policy and economic conditions normalize, we expect correlations between commodities and traditional asset classes to continue to decrease. As a result, we believe investors will continue to benefit from the diversification benefits commodities offer as part of a portfolio."
The Dow Jones-UBS Commodity Index Total Return increased 0.41% in March. Overall, 10 out of 22 index constituents posted positive returns. Agriculture was the best performing sector, up 4.97%. In addition to Wheat, Corn ended the month higher as the USDA lowered its expectations for ending inventory amid strong demand. Soybeans also increased on continued strong US exports and very tight inventory levels.
Livestock increased 4.38%, led by Lean Hogs. Industrial Metals declined 1.56%. China saw its first ever domestic corporate bond default, adding to existing concerns over the government’s seeming desire to tighten credit conditions.
Energy decreased 1.77%, led lower by Natural Gas, as apprehension over winter supplies eased. Forecasts shifted to expectations for milder weather in the near term outlook, which would curb heating demand. Precious Metals declined the most, down 3.97%, led lower by Silver.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataGold also declined due to concerns over physical demand out of China and India, as well as continued selling following the more hawkish-than-expected March FOMC meeting communication.
