Blood was definitely running in the streets last month.
As our table below reminds, red is now the dominant color in performance tallies. But black hasn’t been completely banished. For those who owned commodities, inflation-indexed Treasuries or cash, June wasn’t a complete loss.
Commodities, of course, were the big winner last month. The Dow Jones-AIG Commodity Index surged more than 9% in June and is now up 27% so far this year, based on the exchange traded note proxy cited in our numbers above. Clearly, if you didn’t have commodities exposure in your portfolio, your portfolio suffered.
Although it’s tempting to chase the hot performance in commodities, strategic-minded investors should be wary at this point. The DJ-AIG Commodity index, like all commodities benchmarks, has been rallying for years. The last calendar year loss for DJ-AIG Commodity was 2001. If the index manages a gain by the end of 2008, that will mark the seventh straight year of calendar year gains.
No, we’re not willing to say when the commodities boom will end. For all we know, it’ll go on for another seven years. Then again, it could end tomorrow. As a general rule, however, the longer any asset class rallies, the more cautious we become on estimating expected returns. At the same time, the longer asset classes endure selling, the more optimistic we become.