Commodities should break out of their 1 1/2-year slump in 2014, boosted by resurgent global economic growth, says James Paulsen, chief investment strategist at Wells Capital Management.
He predicts commodities will outperform stocks and bonds this year.
"I do think there are some reasons why you could be somewhat optimistic about the possibilities for commodities in 2014,"
Paulsen tells CNBC.
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"First of all, they got crushed over the last year and a half, and we kind of revalued the commodity market. So I think there's good value here for the first time."
The Dow Jones-UBS Commodity Index dropped 9.6 percent in 2013, while the Standard & Poor's 500 Index soared 29.6 percent.
"The biggest problem commodities have had over the past year and a half is that there's been spotty growth in the world — contraction in Europe and Japan, a slowdown in the emerging world, a slug here in the United States at 2 percent," Paulsen explains.
But that's changing now, he says. "We have the most synchronized global growth outlook here going into 2014 that we've ever had. There's positive and accelerating growth nearly everywhere. I can't help but think that's good for commodity demand."
Paulsen recommends investing in industrial commodities, because "the thing that's tied the most closely to greater global growth is the industrial commodity spectrum." While he likes agriculture commodities, he is "least interested in the precious metals complex, because there's a bit of a safe-haven premium that might come out further."
Jason Schenker, chief economist at Prestige Economics, echoes Paulsen's view. Schenker says that rising economic growth in the United States, China and Europe will lift commodity prices.
"We expect increases in steel, iron ore, and ferrous scrap prices in 2014 and 2015," he writes in a commentary obtained by
The Telegraph.
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