According to Credit Suisse commodity markets can move higher under their own weight due to the supply demand imbalances that exist in the world. They go so far as to say, commodities will, over time, remain uncorrelated with equity and other asset markets, to the upside.. (Indeed as they have been for the last decade or so).
They present volatility as an opportunity for active management but recommend long term allocations as the ‘best’ approach due to short term shocks etc. Recommend a basket approach to commodities. I agree with CS for the supply demand issues they sight but also, very importantly, the monetary issues all around us.
This the summary, in their own words, from Credit Suisse..
‘We believe recent increased levels of volatility are indicative of a longer-term, secular shift in commodity price volatility, driven primarily by tight supply/demand conditions and further compounded by exogenous factors. While investors may be understandably nervous, in our view, increased volatility may present increased opportunities, particularly with this asset class and its return drivers, which are quite distinct from traditional markets. We believe generally tight supply conditions and continued global growth should exert further upward pressure on commodity prices’. Credit Suisse Aug 2011
Credit-Suisse-Volatility in Commodities-Markets
The super secular commodity bull is intact and will get another leg up soon enough.
All the best
Rich
(5 votes, average: 4.80 out of 5)
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