Commodity ETF investors should monitor inflation as rising inflationary pressures have been historically good for the hard assets market.
“They have different drivers, but now, a lot of things are moving up. I think the common thing I would look at if Ii were an advisor is inflation and your expectation for inflation,” John Love, President and CEO of United States Commodity Funds, said at the Inside ETFs 2018 conference. “We know commodities do extremely well in high inflation environments or when there is even movement toward inflation or inflation shock, especially unexpected inflation. So I think if there is any concern about inflation, look into commodities.”
Investors who are interested in broad exposure to the commodities market may look to something like the United States Commodity Index Fund (NYSEArca: USCI). USCI eschews rolling front month contracts, which can lead to underperformance, especially in a contangoed market, rebalancing each month and selecting the most-backdated contracts and then the seven highest-returning contracts.