The war in Ukraine has disrupted the production and shipment of multiple commodities, including oil, wheat, and nickel. As a result, commodities are looking to enjoy their best quarter in more than three decades.
A report from the Wall Street Journal reveals that the S&P GSCI has climbed 34% in the first quarter and is on track for its biggest gain since 1990. U.S. crude oil prices, meanwhile, have risen 43% to $107.82 a barrel since the end of last year and rose to $123.70 earlier this month, a level not seen since 2008.
In addition, wheat has gained 33% this year, trading at its highest level since 2010, while corn has gone up 24%. Several metals, such as aluminum, copper, nickel, and palladium, have also reached new highs.
“When the supply and demand situation is tight and then you have another supply shock on top of that, it’s not surprising that prices spike even further,” Chris Burton, global head of commodities and portfolio manager at Credit Suisse Asset Management, told the Journal.
Data from Refinitiv Lipper show that general commodities mutual funds and ETFs have seen steady inflows of investor capital for 11 weeks straight through March 23, the longest streak since a 23-week run that ended in June 2021.
Investors wishing to capitalize on this commodities rally may want to consider Invesco’s many commodities funds, including the Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC), the Invesco DB Agriculture Fund (DBA), the Invesco DB Commodity Index Tracking Fund (DBC), and the Invesco DB Base Metals Fund (DBB).
PDBC invests in a combination of financial instruments that are economically linked to the world’s most heavily traded commodities. It offers exposure to commodity futures without the tax hassle of a K-1. The fund also attempts to avoid “negative roll yield,” which could erode returns over time.
DBA, meanwhile, is a combination of futures within several areas of agriculture, including wheat, soybeans, coffee, corn, cattle, cocoa, sugar, hogs, and cotton. It’s ideally designed for investors who believe that commodity prices will continue to rise and who are also seeking to diversify their portfolios away from traditional stocks and bonds at a time of rising interest rates and market volatility.
DBC seeks to track changes in the level of the DBIQ Diversified Agriculture Index Excess Return, plus the interest income from the fund’s holdings of primarily U.S. Treasury securities and money market income less the fund’s expenses.
DBB seeks to track changes, whether positive or negative, in the level of the DBIQ Optimum Yield Industrial Metals Index Excess Return, plus the interest income from the fund’s holdings of primarily U.S. Treasury securities and money market income less the fund’s expenses.
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