Commodity Markets Rallied in September; Investors Positive on Long Term Outlook for Asset Class

Oct 06, 2010, 10:15 ET from Credit Suisse AG

NEW YORK, Oct. 6 /PRNewswire/ -- Commodity markets rallied in September as investor sentiment turned positive amidst the prospects of further rounds of quantitative easing. A noticeable trend shift is taking place, suggesting fundamental supply and demand dynamics will take priority over macroeconomic indicators in determining prices over the long term.

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Nelson Louie, Global Head of Commodities at Credit Suisse Asset Management said, "As reflected in Fed Chairman Ben Bernanke's recent comments, subduing deflation will likely continue to be a top priority of the Federal Reserve over the near term, and as more quantitative easing takes place, we expect commodities prices will continue to rise.  While macroeconomic factors have driven returns over recent history, we expect fundamental factors to drive prices moving forward over the longer term."

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy added, "Historically, Commodities prices have tended to perform best during periods of higher than expected inflation.  Today we're seeing some major developed countries actively discussing or engaging in various fiscal and monetary measures, including devaluing currencies, in order to keep their exports globally competitive, while fiscal policy worldwide remains accommodative.  As a result, investors may continue to seek out investments that should retain their value in spite of inflation.  This has benefited commodities generally and precious metals in particular."  

The Dow Jones-UBS Commodity Index Total Return rose 7.26% in September, bringing the year-to-date performance to 0.90%. Overall, 16 of the 19 index constituents increased in value.  Agriculture commodities were pushed higher by severe weather conditions and supply concerns – seen most prevalently in Sugar and Cotton.  Economically sensitive commodities, especially those in the industrial metals complex, surged, led higher by Aluminum and Nickel, up 13.83% and 12.97%, respectively.  The Precious Metals sector, the best performing group year-to-date, had another positive month.  As economic uncertainty prevailed for the majority of September, Gold and Silver rallied.  Gold returned 4.76%, lead higher by Central Banks changing course to become net purchasers of the precious metal.  Silver rose 12.31% for the month.

The Credit Suisse Total Commodity Return Strategy group periodically produces updates on relevant industry topics. For a copy of their latest white paper, "Capitalizing on Any Curve: Clarifying Misconceptions About Commodity Indexing", please email ir.betastrategies@credit-suisse.com.

About the Credit Suisse Total Commodity Return Strategy

Credit Suisse's Total Commodity Return Strategy has been managed for fourteen 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 a quantitative 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 September 30, 2010 the team managed approximately USD 6.4 billion in assets globally.  

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