By Tom Burnett CFA
Using returns data from the WSJ.com website for May 26, 2022, it is obvious that commodities are the leading performance group among investor alternatives. The Bloomberg Commodity Index has risen 33.2% this year, led by a stunning increase of 141% for natural gas. Gasoline has risen by 71.9% and the S/P Energy ETF (symbol XLE) is up 54% in 2022.
By comparison, securities have underperformed across the board. The equity indexes are down noticeably with the Dow Jones Industrial Average down 11.6% and the S/P 500 Index off by 16.6%. The technology-heavy NASDAQ Composite is down 27% for the year.
Fixed income investments have also been disappointing. The Index of International bonds is down 7.8% led by weakness in the Emerging Markets Index which is off by 16.3% this year. In the U.S. markets, all the major fixed-income indexes are down for the year. The Municipals Index is down 7.7% while the Index of total US bonds is down 9.2%. The High-Yield Index is off 9.9% in 2022, with the Investment Grade Index down 13.5%. The Index of 20+ year Treasuries is the worst performer, down by 19.5% so far. Fixed income investors face major headwinds with inflation running at a 40-year high, and the Federal Reserve publicly carrying out a high profile policy of increasing short-term interest rates. The next important Federal Reserve meeting is set for June 15, when most observers expect the Fed to raise the Fed Funds rate by another 50 basis points. Additional increases are expected in the third and fourth quarters of the year.
Tom Burnett CFA is Director of Researcch