Commodity markets were markedly higher in December as fundamental supply and demand characteristics strengthened and the global macroeconomic outlook improved. Each commodity in the index appreciated over the course of the month.
Nelson Louie, Global Head of Commodities at Credit Suisse Asset Management said, “Global macroeconomic conditions and fundamentals were broadly supportive of commodities in December and we believe this theme is likely to continue heading into the New Year. Inventory levels generally remain tight, supply disruptions continue to add further supply pressure for multiple commodities, and demand generally continues to grow in emerging markets and recover in developed markets.”
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy added, “Heading into 2011, global growth prospects in developed and emerging regions seem to be improving, a scenario which should likely benefit commodities prices across sectors. Specifically, we would expect Industrial Metals and Energy prices to continue to increase as developing countries seek to build out their infrastructures. Additionally, improving growth expectations for the US and Europe, due largely to the continued accommodative monetary policies of their Central Banks, may further benefit the Precious Metals sector as well as commodities overall.”
The Dow Jones-UBS Commodity Index Total Return rose 10.69% in December, bringing the year-to-date performance to 16.83%. Overall, all of the 19 index constituents increased in value. The Precious Metals sector closed 2010 as the index’s best performing sector, up 4.78% in December and 42.66% for the year. Gold continues to be a highly sought commodity amongst investors and Central Banks alike, while Silver continues to be coveted by investors for its dual usage as a store-of-value and an industrial metal. The Energy sector was the only sector to finish in negative territory in 2010, decreasing 10.55%. Natural Gas, the year’s worst performing commodity, lost 40.59% amidst rising inventory levels and diminishing demand.
The Credit Suisse Total Commodity Return Strategy group periodically produces updates on relevant industry topics. For a copy of their new 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 December 31, 2010 the team managed approximately USD 8.1 billion in assets globally.
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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.
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