General
- Individual commodity prices have historically tended to move together over very long bull and bear cycles. These super-cycles have often lasted a decade or longer. We believe a new bull super-cycle1 began in 2020.
- Because of its typically low correlation with both stocks and bonds, we believe including an allocation to Commodities in a diversified portfolio can potentially help reduce volatility and mitigate downside risk without sacrificing return.
Oil
- 2023 was a roller coaster for oil prices as investors weighed supply concerns against the probability of an impending economic recession. Despite the volatility, oil’s long-term potential remains bright. We believe structural supply challenges and supply restraint by OPEC (Organization of the Petroleum Exporting Countries) will continue to drive performance in 2024.
- Moving forward, even the slightest amount of demand recovery should be supportive of oil prices.
Gold
- Central banks across the globe have been purchasing record amounts of gold since 2022. We believe that gold’s unique quality as a reserve asset that carries no counterparty risk – risk of being devalued by another nation’s debt – is a key reason for higher purchasing activity.
REITs (Real Estate Investment Trusts)
- REITs come in all shapes and sizes — a REIT that specializes in data centers differs wildly from a REIT that specializes in malls or office buildings — and returns can vary widely as a result.
- In our view, monitoring the fundamentals, valuations, trends, and performance of these different REIT subsectors can provide opportunities for investors in REITs.
1. Bull super cycles are an extended period of time, historically 15-20 years, where commodity prices move upward together.