Commodities were the bubble of 2008, and now investors are hoping to re-inflate the bubble and send markets and exchange traded funds (ETFs) on another upswing.
Commodities have been seeing a bit of a rally in recent weeks, but seeing how swiftly and hugely this summer’s bubble popped, could we be getting too optimistic? Can this really sustain?
One sign that it can’t: Alcoa (AA) reported their profit reports during the start of the trading session, leaving many hopeful investors disappointed and laying the groundwork for the sentiment of things to come.
Bob Moon reports on Marketplace with analyst Ryan Detrick, who feels this rally isn’t going to stick. He cites the fact that there’s too much optimism after such a drastic selloff in recent months.
Fertilizer company Mosaic warned that sales activity dropped sharply at the end of last year.
There is little sign of a sudden turnaround in food or energy prices, however, commodities could get a lift from the coming infrastructure spending with Obama’s new plan. Monsanto, the world’s largest seed maker, has reported its fiscal first-quarter profit more than doubled on higher sales to Latin America, and raised its expectations for the year, reports Marley Seaman for the Associated Press.
Latin American sales make up the bulk of Monsanto’s first-quarter revenue. Most of the company’s revenue come from its U.S. business, where sales pick up in the second and third quarters.
- Energy Select Sector SPDR (XLE): up 16% in 2 weeks; 5.4% above 50-day
- iShares Dow Jones US Oil And Gas Exploration Index (IEO): up 22% in 2 weeks; 8.2% above 50-day
- iShares S&P North American Natural Resources (IGE): up 18.2% in 2 weeks, 6.3% above 50-day
Right now, commodities appear to be on an uptrend, and you can’t fight the trend. It’s why we use the trend-following strategy we do – so we can be in when the trend is up and out when it’s down.