The commodities market had a wild ride in 2014 while the rest of Wall Street enjoyed a continued run-up. All in all, this year was characterized by persistently accommodative central bank policies, improving albeit lackluster growth prospects, and rising geopolitical tensions overseas.
With that in mind, it’s no wonder that the U.S. dollar managed to stage an impressive rally as the Fed draws closer and closer to raising rates at home while the remaining major central banks, namely the European Central Bank and Bank of Japan, remained firmly entrenched in stimulus mode. Inevitably, the rise of the dollar served as a fundamental headwind for commodity prices, which further saw downward pressures due to weakened demand for raw materials from countries like China. The tug of war between improving growth, a rising dollar, and geopolitical uncertainties led to volatile trading for many commodity producers over the past year.
Be sure to also see the Best and Worst Performing Commodities of 2014.
Below, we highlight the five best and five worst commodity stocks from 2014; please note this only includes firms operating in the Basic Materials sector with a market cap over $10 billion (all YTD returns as of 12/23/2014):
Among the biggest winners were two energy-related names, LNG and WGP, which managed to defy the odds despite stiff profit-taking pressures across oil-related assets of all sorts. Improving growth prospects at home, characterized by booming auto sales and a continued housing market recovery, paved the way higher for the remaining names on the “best performers” list.
See also What Big Banks are Saying About Commodities in 2015.
Considering the steep sell-off seen in oil prices throughout the final quarter of 2014, it’s not terribly surprising to see that the three worst performing producers were energy-related firms. Rising crude oil production at home coupled with a strong U.S. dollar and subdued global demand all collided to create very strenuous headwinds for the entire basic materials sector throughout 2014.
The Bottom Line
The seemingly never-ending ascent on Wall Street put a damper on raw materials prices and related producers for most of 2014 as investors focused on lucrative returns in the equity market in lieu of chasing opportunities in the commodity market. With 2015 on the horizon, many will look for some of the beaten down names to reverse their course, although only time will tell which asset’s are most poised to rebound higher.
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Disclosure: No positions at time of writing.
