NEW YORK, April 18, 2017 /PRNewswire/ -- Commodities decreased in March, driven by shifting supply expectations, according to Credit Suisse Asset Management.
The Bloomberg Commodity Index Total Return performance was negative for the month, with 18 out of 22 Index constituents posting losses.
Credit Suisse Asset Management observed the following:
- Agriculture decreased 5.83%, led lower by Sugar amid improved supply expectations for Brazil's key Center-South region due to favorable weather conditions at the start of the harvest season.
- Industrial Metals eased 2.05%, driven by Nickel, as changes in inventory levels reflected less tightening than expected given supply disruptions out of the Philippines and Indonesia.
- Energy declined 1.45%. Crude Oil and petroleum products fell as US oil production continued to increase alongside inventory levels that are well above the historical average for this time of the year.
- Precious Metals decreased 0.62%, with both Gold and Silver posting losses, after expectations rose that the US Federal Reserve (Fed) will follow through with its guidance of raising rates two more times in 2017 after the latest rate hike in early March.
- Livestock increased 0.21%, driven higher by Live Cattle, which rose after the US Department of Agriculture revised its expectations for 2017 beef exports higher in its latest World Agriculture Supply and Demand Estimate report.
Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management, said: "The upcoming European elections, the US administration's attempts to implement its policy objectives and the ongoing global petroleum rebalancing remain at the forefront of the minds of commodity market participants and investors. For crude oil, a high compliance rate in the OPEC-coordinated production agreement has helped to rebalance crude supply abroad. However, this has allowed US shale producers to increase production at lower costs than historically. Demand for petroleum products has helped bring US inventories down to relatively normal levels ahead of the driving season. Overall, the recent decline in crude prices may increase the odds that OPEC elects to continue its output cuts in the second half of the year."
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added: "The US central bank met expectations of an additional interest rate hike, setting the tone for the long awaited gradual normalization of interest rates. Loose monetary policy and rising oil prices have helped inflation surpass the Fed's target of 2% in February. Inflation within the US may increase further if economic activity increases more than expected as monetary policy continues to normalize. As such, investors may benefit from including commodities within their portfolios as a hedge against periods of higher than expected inflation."
About the Credit Suisse Total Commodity Return Strategy
Credit Suisse's Total Commodity Return Strategy is managed by a team with over 30 years of experience, and seeks to outperform the return of a commodities index, such as the Bloomberg Commodity Index Total Return or the S&P GSCI Total Return Index, using both a quantitative and qualitative commodity research process. Commodity index total returns are achieved through:
- Spot Return: price return on specified commodity futures contracts;
- Roll Yield: impact due to migration of futures positions from near to far contracts; and
- Collateral Yield: return earned on collateral for the futures.
As of March 31, 2017, the Team managed approximately USD 8.7 billion in assets globally.
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This document was produced by and the opinions expressed are those of Credit Suisse as of the date of writing and are subject to change. It has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of Credit Suisse to any person to buy or sell any security. Any reference to past performance is not necessarily a guide to the future. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable but Credit Suisse does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof.
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Certain risks relating to investing in Commodities and Commodity-Linked Investments: Exposure to commodity markets should only form a small part of a diversified portfolio. Investment in commodity markets may not be suitable for all investors. Commodity investments will be affected by changes in overall market movements, commodity volatility, exchange-rate movements, changes in interest rates, and factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Commodity markets are highly volatile. The risk of loss in commodities and commodity-linked investments can be substantial. There is generally a high degree of leverage in commodity investing that can significantly magnify losses. Gains or losses from speculative derivative positions may be much greater than the derivative's original cost. An investment in commodities is not a complete investment program and should represent only a portion of an investor's portfolio management strategy.
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