NEW YORK, Sept. 12, 2011 /PRNewswire/ -- Commodities demonstrated mixed performance in August as market participants grew increasingly concerned about the extent of the global growth slowdown.
Nelson Louie, Global Head of Commodities in Credit Suisse's Asset Management division, said, "Commodities demonstrated mixed performance in August as weaker macroeconomic data and uncertainty surrounding the state of the global economy continued to impact markets. Falling consumer confidence, poor non-farm payroll figures, and other weak leading economic indicators are increasing recessionary fears. However, realized data from July on global industrial production momentum indicated a rebound began in May. Chinese trade data for July suggests economic activity is still robust, with imports of key commodities remaining strong. Fundamentals for key commodities look to be growing increasingly tight in the face of strong demand and constraints on supply growth."
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, "While increased volatility and risk aversion were common themes across capital and commodity markets in August, commodities outperformed equities with the S&P 500 losing 5.43%. We believe investors will continue to benefit from the diversification benefits that commodities provide."
The Dow Jones-UBS Commodity Index Total Return was up by 1.00% in August. Overall, 8 out of 19 index constituents increased in value. Precious Metals was the strongest sector, gaining 10.10% for August, due to continued strong investor demand. Agriculture was also a strong performer, up 9.22%, led by grains and Coffee. Estimates for Corn yield were reduced to lower than the USDA's latest estimates amid the recent hot and dry weather damaging the developing crop. This may suggest that the USDA will ultimately reduce their production and ending inventory expectations. Livestock ended the month lower, losing 4.60%, led by Lean Hogs on expectations that previously strong China export demand may ease and that hog weights may improve in the fall. Higher feed costs also mean livestock may be brought to market sooner than expected. The Energy sector posted a loss of 4.92%, with all components trading lower. Fundamental data releases remained broadly supportive for the crude complex, but concerns increased that demand would eventually falter. Industrial Metals was the worst performing sector, given the sector's high correlation with global growth, ending the month down 7.48%. Fears of a hard landing in China weighed on the sector, as did concerns growth would slow in the developed world.
The Credit Suisse Total Commodity Return Strategy group periodically produces updates on relevant industry topics. For a copy of the team's white paper, "Commodities Outlook: Increased Volatility, Increase Opportunity?", please email email@example.com.
About the Credit Suisse Total Commodity Return Strategy
Credit Suisse's Total Commodity Return Strategy has been managed for 17 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 August 31, 2011 the team managed approximately USD 11.4 billion in assets globally.
An investment in commodities is not a complete investment program and should represent only a portion of an investor's portfolio management strategy. Investment in commodity markets may not be suitable for all investors. Commodity markets are highly volatile and the risk of loss in commodities and commodity-linked investments can be substantial.
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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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