Commodities posted gains in April despite mixed macroeconomic conditions. Prices were supported by increased inflation expectations and ongoing tensions in the Middle East.
Nelson Louie, Global Head of Commodities at Credit Suisse Asset Management, said, “Prices of risky assets generally increased for the month of April, while the US dollar continued to weaken. Precious metals once again took the spotlight in April, posting strong gains amidst currency uncertainty. Investor focus shifted towards the US debt burden, after Standard & Poor’s put the US on negative watch for the first time. Meanwhile, other countries, such as the UK, France and Germany, have also taken steps to address deficit reduction issues. Concerns over accelerated inflation in various parts of the world, and the future plans of troubled European nations, added to the risk premium for precious metals, while the ongoing situation in the Middle East coupled with strong export demand pushed Crude prices higher.”
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, “With economies around the world improving, and continued extraordinarily loose monetary policy in the United States, odds of inflation overshooting historical levels and expectations remain elevated. We believe investors will continue to benefit from the diversification benefits that commodities provide.”
The Dow Jones-UBS Commodity Index Total Return was up by 3.46% in April. Overall, 11 out of 19 index constituents increased in value, with Precious Metals serving as the strongest sector as both Gold and Silver increased. Energy continued to fare well in April, gaining 5.90%, with Gasoline and Crude Oil leading the way, up 8.92% and 6.08% respectively. Agriculture was neutral with mixed performance from its components. Gains on Corn (+7.70%) and Coffee helped to offset losses from Cotton and Sugar. The Industrials Metals sector was down slightly, declining 0.50% for the month. Concerns remain that Chinese economic growth may slow, curbing base metals demand. Livestock was the worst performing sector, down 7.12%, erasing its gains from the first quarter when it was the Index’s top performing sector. Lean Hogs fell 8.32% while Live Cattle declined 6.30% due to signs that consumers were curbing demand amid higher retail prices.
The Credit Suisse Total Commodity Return Strategy group periodically produces updates on relevant industry topics. For a copy of their white paper, “How Commodities Can Help Investors Face the Uncertainty of the Inflation/Deflation Debate“, please email email@example.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 April 30, 2011 the team managed approximately USD 10.7 billion in assets globally.
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