Given that most mainstream investments have struggled through the global economic downturn experienced over the last few years, commodities – like shipping containers, are becoming increasingly popular. Institutional investors, such as endowment and pension funds, are allocating more money towards this class of assets to benefit from their long-term advantages.
By allocating across a broader mix of asset classes and combining them, investors can reduce risk. – Mike Brooks, Manager of The Aberdeen Fund
Commodity investments can help to offset the volatility of stocks and bonds and offset inflation risks. The value of commodities increases with inflation and negatively correlates to stocks and bonds. Therefore, when bonds have consecutive negative returns, commodities are more likely to post positive returns. In addition, commodities perform best in periods when your portfolio needs the most help, during periods of high inflation, strife or unexpected market shocks. Because supply is threatened during this time, commodity prices will increase.
Taking into account the supply and demand factor of each commodity, along with the industry they reside in, it appears different segments are starting to rise together. Although it has been awhile since commodities got the investment community excited, it appears that investors have found themselves in the early stages of the return to a Bull market.