Is This a True Commodities Comeback (and What Should You Buy if So)?

Is this a Commodities Comeback I spy?

Copper futures just hit their highest since May 2015. Lumber futures are approaching their 2004 housing bubble peak. Crude oil is climbing off the mat, while wheat, soybeans, and corn all recently spiked higher.

I don’t want to go (lean) hog wild here. But after suffering for the last few years, commodities are once again heading higher – and that’s opening up fresh profit opportunities for you.

First, let’s talk about what’s driving the move. Commodities are largely priced in dollars. So as the dollar falls, it tends to drive resources prices higher. You can see from this weekly chart of the PowerShares DB US Dollar Index Bullish Fund (UUP, Rated “C”) that the buck is close to breaking down from a range that dates all the way back to January 2015.

Stronger economic growth in places like Europe and Asia is also helping support a revival in commodity pricing. The International Monetary Fund just boosted its 2017 and 2018 growth forecasts for China, Japan, and Europe.

Then there’s the argument that commodities have just gotten too darn cheap, at least on a relative basis. Take a look at the chart below from a recent Bloomberg column. It suggests commodities are approaching an inflection point, and that investing in resources and their derivatives — rather than traditional equities — could pay off big time in the next few years.

I’m not willing to go that far myself … yet. I want to see more evidence of an upswing in GDP growth, as well as more firming in oil prices.

But it couldn’t hurt to start adding exposure to this beaten-down sector. Plus, it’s easier than ever to do so given the broad-based assortment of ETFs that invest in commodity futures or commodity-linked stocks.

I created this Leading and Lagging Commodities ETFs Screener to help get you started. It lists every ETF we track that’s focused on commodities, precious metals, or related equities. They had to earn at least a “C-” Weiss Rating, and have at least $50 million in assets, to make the cut. The list is sorted in descending order by YTD return.

Data Date: 7/26/2017

The ETFS Physical Palladium Shares (PALL, Rated “C”) took the top spot, followed very closely by the Global X Lithium & Battery Tech ETF (LIT, Rated “C”). Palladium prices recent hit a 16-year high, driven by a growing deficit between supply and demand. Lithium-ion battery demand is surging, in part because of a growing shift toward battery-powered cars. That’s fueling demand for the underlying commodity.

Coming in last were the SPDR S&P North American Natural Resources ETF (NANR, Rated “C”) and the PowerShares S&P SmallCap Materials Portfolio (PSCM, Rated “C+”). NANR is heavily weighted toward mega-capitalization oil stocks and gold miners, something that has hindered performance. PSCM took a hit from some of its steel and aluminum holdings, though they’re now starting to rally again.

If you’re looking to start ramping up your commodities exposure again, my screener should help you out. You’ll also hear plenty about commodities, precious metals, and the outlook for investments focused on them at the conferences I’m going to be attending in the next two months.

That includes the MoneyShow San Francisco, which runs from August 24-26, 2017, and the MoneyShow Toronto, which runs from September 8-9, 2017. If you haven’t registered (for free, by the way), there’s still time … but not much.

So be sure to click here to register for San Francisco or click here to register for Toronto. Or call the MoneyShow team at 1-800-970-4355 and tell them I referred you. I can’t wait to meet up in person and talk markets!

Until next time,

Mike