The first half of 2014 is in the books, and commodities have finally started to see something of a turn around. Commodities had a tough 2013, while equity markets made an unprecedented run higher, turning investor’s attention away from a floundering commodity space. But the first six months of this year saw hard assets move higher and hold pace with broad markets, injecting some much-needed life into the commodity world [for more commodity news and analysis subscribe to our free newsletter].
Here is a look at how the commodity space performed against equities and fixed income thus far in 2014 represented by the SPDR S&P 500 ETF (SPY), Dow Jones-UBS Commodity Index TR ETN (DJP), and Core Total U.S. Bond Market ETF (AGG):
The early stages of the year saw commodities hop out to a noticeable lead, as equities struggled and fixed income remained relatively flat. But as the year went on, equities began to pick up and the hard asset space saw a bit of a struggle in the last few weeks of June. If the second half of 2014 unfolds like the first, commodities will notch a near 15% gain on the year, a respectable annual return.
In the commodities corner, there has been a handful that have stood out from the rest – some for their strong performance, and other because they have not been so lucky.
- Coffee: The big story of 2014 has been coffee futures, as they soared for the first few months of the year. At one point, coffee futures were up over 90% YTD before cooling off in May to gains of approximately 50% for 2014.
- Livestock: Lean hogs and cattle futures have also enjoyed a tear to start off the year, especially in the first quarter. Though prices have been a bit rocky as of late for hogs, cattle futures have continued to pick up steam. The two commodities are up in excess of 25% for 2014.
- Palladium: The precious metals space usually focuses on gold and silver, but both have been outdone by their peer palladium. The white metal gained around 20% through the first half of the year while gold, silver, and platinum jumped by 9%, 7.5%, and 9% respectively.
- Grains: Two grains in particular have struggled to keep pace. The majority of the hard asset world enjoyed positive returns through the first half of the year, but corn and wheat were among the few that saw a decline in price level. Both lost just over 10% over the course of the last six months and will look to turn it around in the latter half of the year.
The Bottom Line
After struggling to keep afloat last year, commodities have gotten off to a solid start in 2014, proving yet again why they deserve a small but meaningful allocation in investors’ portfolios.
Disclosure: No positions at time of writing.