As markets continue to roar forward, many investors have turned their gaze toward the commodity world, wondering how this asset class will fare after a “super-cycle” filled with gains. While there are a number of important factors at play, it is widely agreed that China will have a significant impact on the future of some of the world’s most popular hard assets. What is not widely agreed upon, is whether or not the Chinese economy will hinder or enable commodities going forward, as the emerging nation has seen its economy cool off [for more commodity news and analysis subscribe to our free newsletter].
When it comes to the fuel of the future, many have been touting the advantages of natural gas for our economy, while others point to alternative energies to lead us into the future. But for some reason, coal rarely seems to enter the conversation, as many feel that it is a dated and no longer dominant resource. That argument seems to be subsiding however, as many are beginning to see the advantages of adopting coal as a larger part of our future energy strategy. After suffering for a few years, however, coal may be poised for a comeback not only in price, but also in prevalence [for more coal news and analysis subscribe to our free newsletter].
Establishing exposure to the energy sector is by no means for the faint of heart. Positions in this corner of the commodity universe are ripe with risk and are often times associated with high volatility. But for those who can stomach the risk, allocations to energy can certainly pay off as demand continues to grow across developed and emerging markets alike. Investments in this sector can also be used as tactical tool to hedge against inflation, since increases in the price of commodities like oil and gas prices tend to ripple across the economy. For those who wish to establish a tactical tilt towards the energy sector, we outline an all ETF portfolio that is designed to give well rounded exposure to multiple segments of the energy market [for more energy allocation ideas subscribe to our free newsletter].
In recent years, a number of commodity investors have turned to equities to gain indirect exposure to their favorite hard asset. In most cases, this means investing in a mining company that physically pulls the commodity from the earth and readies it for use. But when it comes to miners, most investors tend to focus on a select few rather than the entire space. While everything from gold and silver to rare earth metals and lithium have been attracting investors’ attention, there are a few companies that are often forgotten by investors for a variety of reasons but could still be attractive plays on the market [see also 12 High-Yielding Commodities For 2012].
Income investors groaned at the news of the Fed’s recent decision to hold rates in their near-zero rate rut until late 2014. That could mean nearly three years until we see an uptick in interest rates which points to three years of scrapping for steady income around markets as interest rates of 0.25% are less than enticing for most investors. But for those who live and die by dividend yields, there are still a number of options available, especially in the commodity space. Investing on the equity side of commodities can offer low correlation (though not nearly as low as the direct commodity itself) while providing a handsome income stream [see also 12 High-Yielding Commodities For 2012].