Commodities And Emerging Markets Stocks Rallied Last Week

Commodities continued to rise last week, posting a second weekly gain. Stocks in emerging markets and foreign real estate shares also popped, generating similar increases. Together, the trio delivered relatively strong returns, in contrast with the rest of the major asset classes, based on a set of exchange-traded funds.

WisdomTree Continuous Commodity Index (GCC), an equal-weighted mix of a broad basket of commodities, rose 1.5% for the trading week through Sep. 18. The gain marks the fund’s second straight weekly advance, lifting GCC to its highest close since February.

CNBC reports that “the next phase of the economic recovery is likely to be driven by commodity-intensive infrastructure investment,” according to several analysts. A key variable in the optimistic outlook for commodities is China. “It has been absolutely stunning how strong China has rebounded on the construction side of things,” says Max Layton, head of EMEA commodities research at Citi in reference to the “spectacular” rally in industrial commodities recently.

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Last week also witnessed relatively strong gains in emerging markets stocks (VWO) and foreign property shares (VNQI), which posted returns fractionally behind the pop in the GCC fund.

The deepest loss last week among the major asset classes: US junk bonds. SPDR Bloomberg Barclays High Yield Bond (JNK) slipped 0.2%. Despite the latest setback, JNK remains close to its highest price since the March coronavirus crash.

The Global Markets Index (GMI.F) edged up, posting its first weekly advance this month. This unmanaged benchmark, which holds all the major asset classes (except cash) in market-value weights via ETFs, rose 0.2% during last week’s trading.

Reviewing results based on the one-year trend continues to show US stocks in the lead. Vanguard Total US Stock Market (VTI) is up 12.3% on a total return basis for the past 12 months through Friday’s close.

All but two of the ETF proxies for the major asset classes are currently posting one-year gains.

The two losers for the trailing one-year window: US (VNQ) and foreign real estate shares (VNQI).

GMI.F continues to post a solid one-year return. The benchmark was up 8.6% at the end of trading on Friday.

Ranking the ETFs above on current drawdown reflects wide-ranging results. At one end of the spectrum is a virtually nil drawdown for SPDR Bloomberg Barclays International Treasury Bond (BWX). That slight setback contrasts with the steep 43.6% peak-to-trough slide for commodities (GCC), the deepest for the major asset classes.

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By James Picerno

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