(snip)"In a revolutionary study from the Yale School of Management’s Center for International Finance entitled Facts and Fantasies About Commodity Futures, research revealed very important differences in how commodities and stocks perform over time. The research team analyzed how commodity investments performed compared to stocks and bonds over the last half century.
Below are some key highlights of the research findings over various investment horizons:
*
Stocks and bonds are negatively correlated with inflation. In other words, as inflation increases, stocks and bonds tend to move in the opposite direction. Commodities futures, in contrast, are positively correlated with inflation. When inflation rises, commodity futures tend to rise as well.
*
Commodity prices can rise even during economic downturns. Commodities can serve as a hedge against stock market and economic risk.
*
Commodities and stocks have a negative correlation. In other words, commodities and stock perform tend to perform oppositely over time. When stocks go down, commodities, over time, tend to move up and vice versa. Thus, a portfolio invested in stocks and commodities, is likely to experience less volatility than a portfolio that is comprised of only stocks.
*
From 1959 to 2004, commodities futures produced comparable annual returns to stocks and greatly outperformed bonds.
*
Commodities have had less risk than stocks over time. The volatility (i.e., fluctuations in portfolio returns) of the returns of commodities futures over a 43-year period was less than the volatility of the S&P 500 index over the same period.
While no one can be certain if the looming recession will be global or more or less confined to the developed world, one thing is clear: ignoring commodities in a declining stock market is irrational.
In a recent interview with Bloomberg (January 7, 200, Jim Rogers, known by many as the world’s expert on commodities investing, reaffirmed his positive outlook on commodities. He stated that ``All commodities are going to be in much shorter supply for another decade.'' Rogers indicated that in the event of a global recession, agricultural commodities may be the best investment among commodities."(snip)



, Jim Rogers, known by many as the world’s expert on commodities investing, reaffirmed his positive outlook on commodities. He stated that ``All commodities are going to be in much shorter supply for another decade.'' Rogers indicated that in the event of a global recession, agricultural commodities may be the best investment among commodities."(snip)
Reply With Quote
Bookmarks