Commodities Ride Record Rally Into 2018

January 03, 2018

What was the hottest asset class at the end of 2017? No one would blame you if you guessed cryptocurrencies or U.S. equities. Both asset classes performed phenomenally throughout 2017, breaking records along the way.

But believe it or not, the group doing the best at the end of the year—and which is still showing signs of strength as the page flips to 2018—is none other than old-school commodities. In fact, commodities are in the midst of their longest streak of gains on record, according to Bloomberg: 13-consecutive days of gains and counting (as of Jan. 2).

 

Bloomberg Spot Commodity Index

 

The end-of-year rally helped commodity ETFs recover from a midyear swoon. At the end of June, all but one broad commodity ETF was in the red for 2017. By the end of the year, the situation had reversed―every broad commodity ETF, with the exception of one, finished the year in the green.

The Elkhorn Fundamental Commodity Strategy ETF (RCOM) was the top-performing ETF of the year in the segent, with a return of 11.1%. On the flip side, the WisdomTree Continuous Commodity Index Fund (GCC) was the sole broad commodity ETF to decline, losing nearly 0.60% in the year.

 

Ticker Fund 2017 Return (%)
RCOM  Elkhorn Fundamental Commodity Strategy ETF 11.08
UCI ETRACS UBS Bloomberg Constant Maturity Commodity Index TR ETN 8.38
BCM  iPath Pure Beta Broad Commodity ETN 7.33
USCI  United States Commodity Index Fund 6.33
GSP iPath S&P GSCI Total Return Index ETN 6
UCIB  ETRACS CMCI Total Return ETN Series B 5.85
PDBC  PowerShares Optimum Yield Diversified Commodity Strategy No K-1 Portfolio 5.03
DBC  PowerShares DB Commodity Index Tracking Fund 4.86
RJI  Elements Rogers International Commodity Index-Total Return ETN 4.05
DWAC  Elkhorn Commodity Rotation Strategy ETF 4.03
GSG  iShares S&P GSCI Commodity Indexed Trust 3.89
GSC  GS Connect S&P GSCI Enhanced Commodity TR Strategy ETN 2.9
FTGC  First Trust Global Tactical Commodity Strategy Fund 2.72
CMDT  iShares Commodity Optimized Trust 1.51
DJCI ETRACS Bloomberg Commodity Index Total Return ETN 0.96
DJP  iPath Bloomberg Commodity Index Total Return ETN 0.74
GCC  WisdomTree Continuous Commodity Index Fund -0.57

Note: Table measures the total return for 2017 for all broad commodity ETFs for which full-year data is available. 

 

Cheapest Since The '90s?

Heading into 2018, at least a few notable analysts believe that the under-the-radar rally in commodities could continue. Jeffrey Gundlach, the outspoken CEO of DoubleLine Capital, recently said that buying commodities could turn out to be one of the best investments of 2018.

Gundlach believes commodities are as cheap relative to stocks as they were in the 1970s and during the dot-com bubble of the 1990s, periods that were followed by strong outperformance by commodities.

He expects the dollar to weaken, and for commodities—including gold—to rise in 2018.

 

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