Commodity Market Declined Amid Continued Macroeconomic Uncertainty in December
NEW YORK, Jan. 8, 2013 /PRNewswire/ -- Commodities were lower in December as continued uncertainty weighed on markets.
Nelson Louie, Global Head of Commodities in Credit Suisse's Asset Management business, said, "Commodities ended 2012 lower as a result of disappointing growth momentum. Although markets were largely focused on the looming US Fiscal Cliff towards the end of the year, the US managed to avert economic calamity with lawmakers approving a deal on January 1, 2013. Over the year ahead, the rate of global growth will likely once again be the key to commodity performance. To that end, recent developments suggest that 2013 may be a better year for the asset class. The recent evidence continues to suggest that global growth may have troughed, with the possibility of a modest rebound over the course of the new year."
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, "Commodities could benefit from a rebound in global growth along with continued low interest rates. Inflation may overshoot expectations if economic activity begins to pick up more robustly than expected. Commodities have historically tended to outperform during periods of higher than expected inflation. Commodities may also continue to provide exposure to 'tail risk' events on the supply side, with the Energy and Agriculture sectors remaining particularly vulnerable. We believe investors will continue to derive long-term diversification benefits that commodities provide."
The Dow Jones-UBS Commodity Index Total Return was down by 2.61% in December. Overall, 12 out of 20 index constituents posted negative returns. Agriculture was the worst performing sector, down 4.46%. Wheat and corn declined after the USDA reported a slowdown in export demand. In addition, soybeans and corn were further pressured lower due to improved weather conditions in South America. Precious Metals declined, losing 3.81%, as a result of the looming fiscal cliff, despite Chairman Bernanke's early-December announcement that the Federal Reserve would be targeting lower unemployment before reigning in its extremely accommodative monetary policies. Energy decreased 1.95%, led lower by Natural Gas as winter weather forecasts for the US remained relatively mild. The Industrial Metals sector ended the month slightly lower, down 0.74%, amid signs of inventory builds in China and in London Metals Exchange warehouses. Livestock was relatively unchanged, up 0.45%. However, Russia announced it will require US exporters to certify that all pork and beef shipments are free of a controversial feed additive, effectively banning US exports. This move was largely seen as political retaliation for a recently passed bill in the US Senate.
About the Credit Suisse Total Commodity Return Strategy
Credit Suisse's Total Commodity Return Strategy has been managed for 18 years and seeks to outperform the return of a commodities index, such as the Dow Jones–UBS 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 31, 2012 the team managed approximately USD 11.2 billion in assets globally.
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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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