Nelson Louie, Global Head of Commodities in Credit Suisse’s Asset Management business, said, “There is increasing optimism among some economists that global GDP will accelerate from a trough of 2.8% in the third quarter of 2013 to higher levels in 2014, driven by stronger than expected growth in the US and a continuing recovery in Europe. This is potentially the first significant acceleration in global growth in three years and may be supportive of global commodity demand. While key macroeconomic risks have recently diminished and the economic tide appears to have shifted, significant changes to expectations may negatively impact markets, including commodities.”
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, “US Federal Reserve Chair nominee Janet Yellen has indicated she will tolerate higher than targeted levels of inflation in order to bring the unemployment rate down more rapidly. Outside of the US, monetary policy will also likely continue to be accomodative as policy makers may generally err on the side of caution and may be reluctant to tighten too quickly. In this context, the risk of inflation overshooting expectations is elevated. As commodities tend to outperform traditional asset classes in periods of higher than expected inflation, we would expect investors to benefit from a long-term core position within a diversified portfolio.”
The Dow Jones-UBS Commodity Index Total Return decreased 0.80% in November. Overall, 14 out of 22 index constituents posted negative returns. Precious Metals was the worst performing sector, down 6.35%, amid uncertainty regarding the future of US stimulus measures. A Federal Reserve official said that asset purchases may be scaled back this year, despite assurances from Janet Yellen, likely the next chair of the Federal Reserve, that the US central bank would continue its accommodative monetary policy. Industrial Metals declined 4.80% as increased global supplies weighed on the sector. Livestock decreased 1.19%, led lower by Lean Hogs, due to heavier hog weights and expectations of increased pork supply. Agriculture was relatively unchanged, up 0.15%, due to mixed performance from sector components. While Soybeans and Soybean Meal increased, Wheat was pressured lower by slowing demand. In addition, the Environmental Protection Agency proposed a reduction in the overall biofuel mandate, potentially curbing demand for Corn, the main substance used to make ethanol in the US. Energy increased 2.28%, led by Natural Gas. Gasoline and Heating Oil were also top performers. The US Department of Energy reported a large draw in distillate inventories during the month, bringing inventory levels well below average levels for this time of year. Gasoline inventory levels also fell for the month. Meanwhile, WTI Crude Oil remained weak on rising stock levels, refinery maintenance, and rising US oil production.
About the Credit Suisse Total Commodity Return Strategy
Credit Suisse’s Total Commodity Return Strategy has been managed for 19 years and seeks to outperform the return of a commodities index, such as the Dow Jones–UBS Commodity Index Total Return or the S&P GSCI Total Return Index, using both a quantitative and qualitative commodity research process. Commodity index total returns are achieved through:
- Spot Return: price return on specified commodity futures contracts;
- Roll Yield: impact due to migration of futures positions from near to far contracts; and
- Collateral Yield: return earned on collateral for the futures.
As of November 30th, 2013 the team managed approximately USD 10.7 billion in assets globally.
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This document was produced by and the opinions expressed are those of Credit Suisse as of the date of writing and are subject to change without obligation to update. It has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of Credit Suisse to any person to buy or sell any security. Any reference to past performance is not a guide to future performance. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable but Credit Suisse does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof. Certain information contained in this document constitutes “Forward-Looking Statements” (including observations about markets and industry and regulatory trends as of the original date of this document), which can be identified by the use of forward-looking terminology such as “may”, “will”, “should”, “expect”, “anticipate”, “target”, “project”, “estimate”, “intend”, “continue” or “believe”, or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties beyond our control, actual events, results or performance may differ materially from those reflected or contemplated in such forward-looking statements. Readers are cautioned not to place undue reliance on such statements. Credit Suisse has no obligation to update any of the forward-looking statements in this document.
Certain risks relating to investing in Commodities and Commodity-Linked Investments: Exposure to commodity markets should only form a small part of a diversified portfolio. Investment in commodity markets may not be suitable for all investors. Commodity investments will be affected by changes in overall market movements, commodity volatility, exchange-rate movements, changes in interest rates, and factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Commodity markets are highly volatile. The risk of loss in commodities and commodity-linked investments can be substantial. There is generally a high degree of leverage in commodity investing that can significantly magnify losses. Gains or losses from speculative derivative positions may be much greater than the derivative’s original cost. An investment in commodities is not a complete investment program and should represent only a portion of an investor’s portfolio management strategy.