A ‘supercycle’ bear market in commodities still has a few years left to run: Wells Fargo
- Written by MarketWatch
- Published in Economics
Beaten-down commodities markets might tempt investors to start tactically adding the asset class to their portfolios in a bid for diversification. That’s understandable, but likely premature, according to one analyst.
“Is November 2019 one of these great ‘tactical’ times to add commodities to a portfolio? Our opinion is no,” said John LaForge, head of real asset strategy at Wells Fargo Investment Institute, in a Monday note.
The Bloomberg Commodity Index BCOM, -0.58%[1] is up 1.7% in the year to date, trailing a 24.5% rise over the same stretch for the S&P 500 SPX, -0.01%[2] and a nearly 20% rise for the Dow Jones Industrial Average DJIA, -0.34%[3]. The commodity gauge is down 8% compared with its level a year ago, while the S&P 500 and Dow were up 16% and nearly 12%, respectively.
Asset diversification is widely seen as a crucial ingredient to successful investing, LaForge noted. The gray areas in the charts below represent long-term bear markets for each major asset class, while white areas represent bull markets. The checkered pattern shows that stocks, bonds and commodities don’t necessarily move together over long periods....
