Tags: commodities | 2014 | stocks | decline

MarketWatch: Look for Upside Reversal in Beaten Down Commodities

By    |   Tuesday, 17 December 2013 07:08 AM

Commodities have a strong likelihood of regaining investor favor in 2014 after three straight years of negative performance and losses, MarketWatch reported.

Part of that rationale is apparently that whatever goes down must eventually go back up – and vice versa.

Overall, commodities are down approximately 9 percent in 2013, according to the Dow Jones-UBS Commodity Index. They have not declined three years in a row since Factset Research began keeping that aggregate data in 1991.

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In contrast to commodities, the S&P 500 is up about 25 percent year to date, with U.S. stocks enjoying a dramatic outperformance year.

"Based off historical norms, either stocks are way too high or commodities are way too low. The odds are high for either a massive commodity rally or a rather large stock market selloff," Phil Flynn, senior market analyst at Price Futures Group, told MarketWatch.

Arvin Soh, a portfolio manager at GAM, said some commodity funds have shut down or returned capital to investors in 2013, and it is likely to happen again in 2014.

That's "potentially positive because there is less capital invested in the space," Soh asserted.

Sal Gilbertie, president and chief investment officer at Teucrium Trading, suggested it could make sense for some investors to rotate capital into commodities.

"Taking some equity-based profits off the table while reallocating a portion of that money to commodities . . . is a classic asset-allocation strategy," he told MarketWatch.

Not all commodities have declined in 2013. According to FactSet, the biggest gainers have been natural gas (up 30.1 percent), orange juice (up 26 percent) and cocoa (up 24.6 percent).

But the list of decliners this year is longer and steeper, and includes corn (down 37.9 percent), silver (down 35.5 percent), gold (down 26.9 percent), coffee (down 22.6 percent), wheat (down 18.6 percent) and sugar (down 16.4 percent).

However, Morningstar said the outlook for commodities in 2014 is a bleak one and declared the sector is "virtually friendless."

"Commodities are unlikely to find any friends in 2014, with the exception of the ever-resilient gold 'bugs,'" the research firm predicted.

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Commodities have a strong likelihood of regaining investor favor in 2014 after three straight years of negative performance and losses, MarketWatch reported.
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2013-08-17
Tuesday, 17 December 2013 07:08 AM
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