PowerShares DB Commodity Index Tracking Fund (NYSEArca: DBC) is down about 6% so far in 2013 compared with a gain of roughly 14% for the S&P 500 to continue the resources ETF’s underperformance trend that started about two years ago.
Now, Wall Street analysts say commodities’ best days are probably behind them.
“Commodities are trailing equities for the longest stretch in almost 15 years as Goldman Sachs Group Inc. and Citigroup Inc. predict the end of the decade-long bull market even as the global economy expands,” according to a Bloomberg report Thursday.
With assets of nearly $6.5 billion, DBC is the largest diversified exchange traded product for commodities. It tracks energy, base metals, precious metals and agriculture by investing in futures contracts. The ETF charges a management fee of 0.85%.
“Broad-basket commodity products will likely interest two kinds of investors: those who believe global demand for commodities will grow in coming years, and those seeking diversification and an inflation hedge. Investors interested in growing worldwide demand for commodities should keep an eye on demand from China, India, and the rest of the emerging markets,” writes Abby Woodham, Morningstar analyst, in a report on DBC.
“As an inflation hedge, commodities usually underperform in periods of low inflation and outperform when inflation is high, allowing investors to maintain their purchasing power,” she added. “Generally, commodities shine at the beginning of a recession and at the end of an economic expansion. As for risk, commodities are a high-volatility asset class.”