Commodities Were Extremely Strong Last Year, And 2017 Should Be Bullish Too
Commodities were the second-best asset class last year because manufacturers and trade are showing improvement.
Global manufacturing expanded for the fourth straight month in December, reaching 52.7, its highest reading since February 2014. The individual U.S., Germany, Japan, and eurozone PMIs all hit their highest posts in at least a year, building on a strengthening uptrend that’s been in place since September. International trade volume expansion hit a 27-month high, according to Markit. And despite the “negative” consequence of Brexit, the U.K. Manufacturing PMI posted an amazing 56.1, up from 53.4 in November.
As for commodities, I’m pleased they’ve shown resilience in the face of a strengthening U.S. dollar. CLSA analyst Christopher Wood touched on this very topic in his recent edition of “GREED and fear,” writing that “the renewed dollar strength post Trump’s victory has not been accompanied by renewed commodity weakness. Rather the reverse has happened, with copper rallying, for example, on presumed hopes of increased demand triggered by Trump’s infrastructure policies.”
China’s commodities trading volume has also been impressive, maintaining its rank as the world’s heaviest for the seventh consecutive year.
Of course, price appreciation for commodities and natural resources is inflationary for consumer goods. Because of possibly rising gasoline prices, U.S. drivers are expected to spend about $52 billion more at the gas pump this year compared to 2016, according to GasBuddy’s 2017 Fuel Price Outlook. Three-dollar gas will likely become a reality again in several large cities, including New York, Los Angeles, Chicago and Seattle.
Whatever you end up paying, make it a point this year to stay optimistic. Not only does being optimistic help you stay healthy, both mentally and physically, but it also allows you to see the opportunities that others might not.
Explore investment opportunities in commodities and natural resources!
PowerShares DB Commodity Index Tracking Fund (NYSE:DBC) was trading at $15.57 per share on Monday afternoon, down $0.26 (-1.64%). Year-to-date, DBC has declined -1.70%, versus a 1.38% rise in the benchmark S&P 500 index during the same period.
DBC currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #3 of 123 ETFs in the Commodity ETFs category.
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About the Author: Frank Holmes
Frank Holmes is the CEO and chief investment officer of U.S. Global Investors. Mr. Holmes purchased a controlling interest in U.S. Global Investors in 1989 and became the firm’s chief investment officer in 1999. In 2006, Mr. Holmes was selected mining fund manager of the year by the Mining Journal, and in 2011 he was named a U.S. Metals and Mining “TopGun” by Brendan Wood International. He is also the co-author of The Goldwatcher: Demystifying Gold Investing. More than 30,000 subscribers follow his weekly commentary in the award-winning Investor Alert newsletter which is read in over 180 countries.
Under his guidance, the company’s mutual funds have received recognition from Lipper and Morningstar, two trusted independent financial authorities. In 2015, Mr. Holmes led the company into the exchange traded fund (ETF) business with the launch of the U.S. Global Jets ETF, which invests in the global airline sector.
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