Commodity markets continued to gain in October as investor sentiment stayed positive as the likelihood of further rounds of quantitative easing gained momentum. In determining commodity prices over the long term horizon, fundamental supply and demand dynamics are expected to take priority over macroeconomic data as the global economy continues to mend.
Nelson Louie, Global Head of Commodities at Credit Suisse Asset Management said, “Fundamental factors drove much of the strong returns in October. While we expect fundamentals to play an increasingly strong role as economic conditions continue to normalize, the importance of global macroeconomic developments cannot be underestimated. While the exact implications of the efforts to aid economic recoveries taking place in developed economies are unclear, these actions suggest that the odds of greater than expected inflation over time have increased.”
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy added, “Indicators of economic growth and activity remain mixed. Emerging Market economies, as well as a small group of developed ones like Germany and Australia, have demonstrated robust growth, while growth in the US continues to improve at a slower pace than is typical of recoveries. Increased attention to quantitative easing and atypical support measures by the Federal Reserve was a key factor driving the dollar lower relative to most foreign currencies. As investors consider the perils of deflation, unexpected inflation may be a result of such stimulative measures. In an environment characterized by unexpected inflation, commodities have tended to prove their greatest worth.”
The Dow Jones-UBS Commodity Index Total Return rose 4.98% in October, bringing the year-to-date performance to 5.92%. Overall, 13 of the 19 index constituents increased in value. Agriculture commodities were pushed higher by tight supply levels and poor weather conditions – seen most prevalently in Cotton and Sugar. Economically sensitive commodities, especially those in the industrial metals complex, were mixed on varied macroeconomic data; Zinc increased by 10.06% while Aluminum and Nickel finished the month lower, down 0.71% and 1.87%, respectively. The Precious Metals sector, the best performing group year-to-date, had another positive month. As further quantitative easing measures moved closer to fruition, Gold and Silver rallied in anticipation of a weaker US Dollar. Gold and Silver both finished higher in October, returning 3.68% and 12.58%, respectively. The sector gained on heightened uncertainty regarding the global outlook, coupled with rising fears of global fiat currency debasement.
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 firstname.lastname@example.org.
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 October 31, 2010 the team managed approximately USD 6.8 billion in assets globally.
Credit Suisse AG
Credit Suisse AG is one of the world’s leading financial services providers and is part of the Credit Suisse group of companies (referred to here as ‘Credit Suisse’). As an integrated bank, Credit Suisse offers clients its combined expertise in the areas of private banking, investment banking and asset management. Credit Suisse provides advisory services, comprehensive solutions and innovative products to companies, institutional clients and high-net-worth private clients globally, as well as to retail clients in Switzerland. Credit Suisse is headquartered in Zurich and operates in over 50 countries worldwide. The group employs approximately 50,500 people. The registered shares (CSGN) of Credit Suisse’s parent company, Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. Further information about Credit Suisse can be found at www.credit-suisse.com.
In its Asset Management business, Credit Suisse offers products across a broad spectrum of investment classes, including hedge funds, credit, index, real estate, commodities and private equity products, as well as multi-asset class solutions, which include equities and fixed income products. Credit Suisse’s Asset Management business manages portfolios, mutual funds and other investment vehicles for a broad spectrum of clients ranging from governments, institutions and corporations to private individuals. With offices focused on asset management in 19 countries, Credit Suisse’s Asset Management business is operated as a globally integrated network to deliver the bank’s best investment ideas and capabilities to clients around the world.
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Important Legal Information
This document was produced by and the opinions expressed are those of Credit Suisse as of the date of writing and are subject to change without obligation to update. It has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of Credit Suisse to any person to buy or sell any security. Any reference to past performance is not a guide to future performance. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable but Credit Suisse does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof.
Certain information contained in this document constitutes “Forward-Looking Statements” (including observations about markets and industry and regulatory trends as of the original date of this document), which can be identified by the use of forward-looking terminology such as “may”, “will”, “should”, “expect”, “anticipate”, “target”, “project”, “estimate”, “intend”, “continue” or “believe”, or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties beyond our control, actual events, results or performance may differ materially from those reflected or contemplated in such forward-looking statements. Readers are cautioned not to place undue reliance on such statements. Credit Suisse has no obligation to update any of the forward-looking statements in this document.
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SOURCE Credit Suisse AG
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