The U.S. is either entering or is already in—depending on who you listen to—a recession, and we’ve been dealing with heightened inflation for quite some time. These two factors provide worry, but also opportunity.
A weakening economy usually causes demand to fall. Of course, there are differing opinions about if, when and for how long prices will decline. But inflation causes the opposite to occur. Increasing prices make our dollars go less far. Fortunately for the individual investor, there are both good choices for selling (or shorting) commodities, and buying (or going long) commodities, when the time is right.
First, let’s look at some interesting choices on the long side:
TILL is a way to go long corn, wheat, soybeans, and sugar futures. TILL is an actively managed fund seeking long term capital appreciation and invests in futures contracts according to a proprietary model. That’s one contract per market, maintaining perpetual, long only exposure to each commodity. Rebalances occur monthly to maintain an approximate equal weight across its holdings.
GCC offers broad diversification to 25 types of commodities across six sectors. It is actively managed and primarily invests in futures contracts. The fund may also invest up to 5% of its net assets in bitcoin futures contracts but will not invest in bitcoin directly.
PDBC is an actively managed ETF that invests in futures and other financial instruments providing economic exposure to a diverse group of commodities. PDBC seeks to exceed the performance of DBIQ Optimum Yield Diversified Commodity Index Excess Return, an index composed of futures contracts on 14 heavily traded commodities across the energy, precious metals, industrial metals, and agriculture sectors.
USO tracks the performance of near-month West Texas Intermediate crude oil futures contracts.
GLD is a physically backed gold ETF that holds deposits of physical bullion in secure vaults, with each share of GLD representing a claim to a fraction. GLD has strong liquidity, high assets under management, and an expense ratio of 0.4%.
SLV is GLD’s cousin. This ETF tracks a deposit of physical silver held in secure vaults, totaling over $11 billion in AUM, approximately 17,000 metric tons. SLV has an expense ratio of 0.5%.
Teucrium manages several ETFs that track futures contracts of agricultural commodities. WEAT provides exposure to wheat futures. Teucrium also offers the Teucrium Soybean Fund (SOYB), which invests in soybean futures as was as the Teucrium Corn Fund (CORN), which provides exposure to the price of corn via a portfolio of futures.
DBC tracks a diversified basket of commodity futures including New York Harbor Ultra-Low Sulfur No. 2 Diesel (ULSD), gasoline, Brent crude oil and West Texas Intermediate crude along with aluminum, copper, natural gas, gold, wheat, corn, soybeans, zinc, sugar, and silver.
Now, on the short side:
SCO tracks two times the inverse performance of the Bloomberg Commodity Balanced WTI Crude Oil Index. SCO invests in swap agreements, futures contracts, forward contracts, and option contracts based on WTI sweet, light crude oil.
GLL’s purpose is to provide two times the inverse (-2x) of the daily performance of the Bloomberg Gold Subindex.
ZSL strives to provide two times the inverse (-2x) of the daily performance of the Bloomberg Silver Subindex.
DRIP’s objective is to provide 200% of the inverse of the performance of the S&P Oil & Gas Exploration & Production Select Industry Index.