By Tom Burnett CFA
According to data from the June 7, 2021 Wall Street Journal, the commodity sector has shown the most positive price performance of any of the asset classes in the more than 100 items followed by its database. Based on closing prices on June 4, 2021, the Bloomberg Commodity Index is up 21.3% in 2021. This strong performance compares to gains of 13.6% for the Dow Jones Industrial Average and 12.6% for the S/P 500 Index. Bonds have performed miserably in 2021 and the Index of 20+ year Treasury bonds is down 11.3%.
“Lean Hogs’ is the leading performer in 2021 with a gain of 70.0%, followed by gasoline at 57% and diesel fuel at 43.6%. Food items are also strong with corn up 41.1%, coffee up 26% and soybeans up 20.4%. The energy sector has recovered with crude oil up 43.5% and natural gas up 22.0%. Industrial metals led by copper (up 29.1%) are also strong this year. Gold and silver, however, are weaker this year following strong performance in 2019 and 2020. Gold prices are actually down 0.2% in 2021.
Many observers see this strong commodity price performance as a likely cause of inflation over the next year or two, but some analysts view commodity price inflation as ‘self-correcting’ through greater production and supply brought on by the higher prices. It is too early to predict how this commodity price movement will impact inflation, but wise investors will continue to monitor this strong price performance to see if it peters out or continues ahead with a more serious inflationary influence.
Tom Burnett CFA is Director of Research