Supply disruptions and increased seasonal demand has helped bolster the commodities space while global central bank policies may support returns through the rest of the year. Investors interested in gaining exposure to the commodities market have a number of exchange traded fund options available.
For instance, the recently launched Elkhorn Commodity Rotation Strategy ETF (NasdaqGM: DWAC), an actively managed commodity ETF that tracks Dorsey Wright & Associates momentum-based investing style, recently caught the eye of a large investor, seeing trading volumes spike to 90,000 shares Tuesday, compared to its average volume of 14,600 per day, according to Morningstar data.
SEE MORE: Elkhorn Rolls Out DWA-, RAFI-Backed Active Commodity ETFs
The DWA relative strength model evaluates a universe of 21 commodities and provides equal-weighted exposure to the five commodities that exhibit the highest relative strength – a momentum investing technique that compares the performance of a security to the overall market. A relative strength or momentum strategy basically bets on high flying securities that will fly to new heights.
Commodities have increased in September largely due to supply fundamental factors, according to Credit Suisse Asset Management.
Specifically, Credit Suisse pointed out that industrial metals strengthened amid reports of suspended mining operations in Southeast Asia. Agriculture rose, with sugar higher on lower-than-expected cane yields in Brazil and a projected global deficit for the season ahead. Energy improved on tightening supplies in the U.S. Precious metals gained on the lower-for-longer interest rate outlook.
“Adverse weather impacted softs, particularly sugar, as frosts in Brazil and lower-than-average monsoon rain in India led to concerns over cane yields,” Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management, said in a note. “The potential for future disruptive weather remains uncertain as expectations for a La Niña vary. Within Energy, OPEC’s tentative agreement for modest production cuts boosted market sentiment.”
SEE MORE: Energy ETFs May Be Seeing Clearer Skies Ahead
Looking ahead, central bank policies around the world may continue to support commodity prices as loose monetary policies would help stimulate growth and support inflationary pressures.
“Global central bank policy may influence commodity returns through year-end,” Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, said in a note. “Both US and non-US central banks seem committed to improving global growth and driving up inflation, each of which may prove supportive for commodities.”
For more information on the commodities market, visit our commodity ETFs category.