A great bear market in raw materials

The Bloomberg Commodity index, which tracks 22 hard and soft raw materials, has fallen to a 13-year low.

15-4-23-tractor-634

A bumper US harvest has hit grain prices

Last decade's long bull market in raw materials, often called the "commodities supercycle", is now a distant memory. This week the Bloomberg Commodity index, which tracks 22 hard and soft raw materials, fell to a 13-year low. It is down by almost 60% from its 2008 peak.

Prices fell across the board, with gold sliding to a five-year-low over ten days, its longest losing streak since 1996. Oil tumbled US futures are at a six-month low below $50 a barrel, while Brent crude hit a three-month trough. Industrial metals are ailing too, with copper close to a six-year low. And a bumper US harvest has hit grain prices.

What the commentators said

"You've got unstinting supply increases and a weak outlook for demand across the board," said Michael McCarthy of CMC Markets. Annual growth in China, whose appetite for metals underpinned the supercycle, has fallen to 7%, the lowest since 1990. The recent stock- market meltdown has revived fears of a hard landing. The global picture looks lacklustre too, with the International Monetary Fund trimming its 2015 global growth forecast from 3.5% to 3.3%.

752-bloomberg

US dollar strength driven by the prospect of rising rates is "a big part" of the picture, said Tony Headrick of CHS Hedging. Commodities are priced in dollars, so tend to fall as the greenback rises, and they become more expensive for non-dollar holders.

Yet the dismal mood suggests this could be "peak bearishness", reckoned Orcam Financial Group's Cullen Roche on pragcap.com. Commodities tend to do well in the late stages of a rebound, when wages rise, stoking inflation and faster growth. We're five years into the US recovery. Time to bet on a raw materials rebound?

Recommended

How to invest in gold
Gold

How to invest in gold

Gold can be a good way to diversify your investments and help during difficult markets. We look at how to get started with the precious metal.
26 Jan 2023
What does the next decade have in store for investors?
Investment strategy

What does the next decade have in store for investors?

Investors face a “sea change” in the investment environment. Dominic Frisby explains what this could mean for your money.
20 Dec 2022
Invest in water: the world’s most valuable resource
Soft commodities

Invest in water: the world’s most valuable resource

David J. Stevenson explains why now is the time to invest in water as the world heads towards a crippling global shortage.
12 Dec 2022
Help your portfolio take off with helium
Commodities

Help your portfolio take off with helium

Dominic Frisby looks at the coldest substance on earth, helium, and explains why now’s the time to buy.
30 Nov 2022

Most Popular

House prices could fall 30%. Should investors be worried about a repeat of 2008?
Investments

House prices could fall 30%. Should investors be worried about a repeat of 2008?

Some analysts are predicting that house prices could fall as much as 30%, which, when compared to the fact that prices have jumped 28% since April 201…
24 Jan 2023
Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Wholesale gas prices are on a downward trajectory, but does this mean lower energy bills later this year?
27 Jan 2023
Council tax increases 2023 – how much more will you pay?
Tax

Council tax increases 2023 – how much more will you pay?

Your council tax bill will go up in April - we reveal the councils that have confirmed what this year’s increase will be.
23 Jan 2023