Don’t count resources out

Commodities have performed poorly over the past year, but they tend to move in long and volatile cycles.

oil pumps
(Image credit: © Getty Images)

It has not been a strong year for commodities. Since peaking in June 2022, the Dow Jones Commodity Index – which tracks a basket of energy, metals and agricultural commodities futures – is down by almost 25%. Shares in many commodity producers have held up better, since today’s prices are still higher than those we saw in the past decade: oil majors can produce plenty of cash with crude at $70-$80 per barrel. But for those who expect inflation to head back to a steady 2% in the years ahead – in line with central banks’ targets – this looks like a helpful tailwind.

Yet commodity prices are always volatile and cyclical, even when they are trending upwards. Take oil: in 1999, it bottomed at around $10 per barrel (prompting The Economist’s infamous “Drowning in Oil” cover, suggesting that the price could still halve to $5). It reached an all-time high of $147 in 2008, on the eve of the financial crisis. Along the way, there were several swings as big as the one we’ve seen in the past 12 months.

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Cris Sholto Heaton

Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.