Credit Suisse Asset Management observed the following:
- Livestock increased the most, up 10.00%, led by Lean Hogs after the USDA reported higher US pork sales in December compared to the same period last year.
- Energy gained 9.04%, due to increased confidence that OPEC members will deliver on previously announced production cuts, potentially moving the supply/demand balance into deficit sooner than previously expected.
- Precious Metals declined 2.17% due to the strengthening of the US Dollar and higher US Treasury yields, dampening investor demand for Gold and Silver.
- Agriculture decreased 2.26%, led lower by Coffee. CONAB, Brazil's national supply agency, increased its production outlook as ideal growing conditions continued in the country's key coffee producing regions.
- Industrial Metals declined the most, down 5.04%, amid predictions of reduced base metal demand out of China after its president announced his willingness to accept less than the 6.5% targeted economic growth rate in an attempt to keep the economy from overheating.
Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management, said: "The year ended strongly for commodities, with fundamentals improving for key commodities as cyclical over-supply resulting from the previous period of higher prices has further eroded. This was especially true for oil after OPEC and non-OPEC members agreed to reduce production, allowing prices to end 2016 in positive territory, something not seen since 2013. During 2017, markets will be focused on whether these countries will comply with the output quotas as well as on monitoring the potential supply response from US shale players as prices increase. However, the price outlook has improved as the global oil supply/demand balance looks set to move into deficit in 2017 and as OPEC reasserts itself as a major player in the oil markets."
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added: "In 2016, multiple foreign central banks increased stimulus measures to support their respective economies. On the other hand, the US Federal Reserve raised short-term interest rates in December and indicated the path for rate hikes in 2017 has accelerated. This policy divergence will continue to impact US Dollar volatility and most likely commodity prices, in the short term. Additional fiscal stimulus measures paired with continued loose monetary policy may potentially lead to more inflation risk. Amid this uncertainty, it may be more difficult to predict how markets will react, highlighting the benefits of holding commodities as a valuable asset class diversifier."
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 December 30, 2016, the Team managed approximately USD 9.2 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 without obligation to update. 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 a guide to future performance. 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.
Certain information contained in this document constitutes "Forward-Looking Statements" (including observations about markets and industry and regulatory trends as of the original date of this document), which can be identified by the use of forward-looking terminology such as "may", "will", "should", "expect", "anticipate", "target", "project", "estimate", "intend", "continue" or "believe", or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties beyond our control, actual events, results or performance may differ materially from those reflected or contemplated in such forward-looking statements. Readers are cautioned not to place undue reliance on such statements. Credit Suisse has no obligation to update any of the forward-looking statements in this document.
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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SOURCE Credit Suisse AG