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Commodities Rallied Last Week

A broad measure of commodities continued to catch a bid last week. For a second week in a row, commodities rallied, posting the strongest gain for the major asset classes, based on a set of exchange-traded funds through Friday, May 8.

 

By James Picerno


The iShares S&P GSCI Commodity-Indexed Trust (GSG) rose 7.2% last week, marking the second straight weekly gain for the fund. That’s the first run of back-to-back increases for GSG since February.

The rebound in prices of raw materials, including crude oil, is partly a reflection of optimism that flows from news that some economies around the world are reopening, at least partially. Although commodities (NYSEARCA:DBC) prices have been battered recently, the latest bounce suggests that the worst of the selling wave has ended. A sustained rally is probably assuming too much, but looking for price stability constitutes bullish thinking for commodities these days and the latest bounce offers a reason for hope on this front.

Meanwhile, prices across the major asset classes were broadly higher last week. Stocks in emerging markets(NYSEARCA:EEM) were the second-best performer. Vanguard FTSE Emerging Markets (NYSEARCA:VWO) rallied 4.4%, lifting the fund to a price that’s close to a two-month high.

Last week’s weakest performer: foreign corporate bonds. Invesco International Corporate Bond (PICB) lost 2.3%, the fund’s first weekly decline since mid-March.

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The upside bias in prices overall lifted an ETF-based version of the Global Markets Index (GMI.F). This unmanaged benchmark that holds all the major asset classes (except cash) in market-value weights via ETFs rose 2.3%–the index’s second straight weekly gain.

Looking at asset classes through a one-year lens continues to show a broad measure of US investment-grade bonds in the lead for the major asset classes. Vanguard Total US Bond Market (NYSEARCA:BND) is up 10.3% on a total-return basis for the trailing one-year period after factoring in distributions.

Meanwhile, commodities are still the worst one-year performer by far. Despite the recent rally, GSG was down a hefty 43.9% at Friday’s close vs. the year-earlier price.

GMI.F is back in positive terrain for the one-year trend, albeit just barely. This multi-asset-class benchmark is up 0.7% over the past year.

Ranking asset classes via current drawdown continues to show a wide range of results, ranging from the deep 74% peak-to-trough decline for commodities (GSG) to the fractional drawdown for inflation-indexed Treasuries (TIP).