On average, commodity stocks have outperformed the S&P 500 in the first 12 months after the beginning of rate-hiking cycles since 1997…
So it shouldn’t be any surprise that more and more traders and investors are putting them in their portfolios to diversify returns and help mitigate other risks, like inflation.
Heightened geopolitical and inflationary pressures have also put a spotlight on commodities this year. And with investors using the asset class for a dual purpose we’ve seen an increase in prices and volatility across the commodity asset class as a whole.
But there are three other reasons why traders should invest in commodities that most of us don’t think about…
Why Traders Should Invest in Commodities
One of the main reasons why traders should invest in commodities is because commodity indexes have rallied amid heightened geopolitical uncertainty and structural supply shortages…
Sound like anything happening in the world today?
So the heightened geopolitical risk may support continued commodity strength.
They’ve also shown consistent resilience in rising-rate environments, and can help investors hedge against rising inflation…
And the current disruption in energy and commodity supplies could impact the inflation outlook in a big way.
That’s because 40% of Europe’s natural gas is sourced from Russia. The country is also responsible for 43% of global palladiums supplies, while Russia and Ukraine combined account for nearly 30% of global wheat exports.
But what most people tend to forget is that there are ETFs that offer convenient and affordable access to a broad range of commodities.
In other words, commodity sectors typically have a low correlation to each other.
For example, precious metals and livestock are two commodities sectors that have been negatively correlated for the past 10 years. So broad commodity exposure could provide a source of diversification against equity and bond volatility.
Check out the short video below to learn more about why traders should invest in commodities, and which ETFs I’m targeting.
Don’t forget to like and subscribe to our YouTube channel if you haven’t already so you can be notified as soon as we post our next video, and see what other trade opportunities we’re paying close attention to!
P.S. Goldman Sachs expects the Federal Reserve to do something it hasn’t done in over two decades…
It said the Fed could raise interest rates by 50 basis points at both its May and June policy meetings. And I’m preparing for it to cause some of the biggest sector rotations we’ve ever seen!
So I put together a special boot camp presentation to show everyone why I see this as a “goldmine” opportunity.
Plus, I’ll even reveal how we can take advantage of this upcoming opportunity starting right now.
