Since the market’s March 9 low, commodity ETFs have skyrocketed as countries start to recuperate from the economic blows. Here are five commodities that have been among the strongest performers.
Coal. China has reduced its supply of coal by clamping down on pollution while demand remains unchanged, which could result in higher prices for the commodity. Now, China will need to import coal to maintain its production and power plants. Coal is the world’s fastest-growing fuel based on consumption. Coal is also a major component in producing steel.
- Market Vectors Coal ETF (NYSEArca: KOL): up 184.3% since low; up 121.7% year-to-date
Steel. Steel has experienced rising popularity as the global infrastructure sector recovers and automakers increase demand. The Chinese markets and the U.S. dollar weakness has helped prop up the base metals market.
- Market Vectors Steel Index ETF Fund (NYSEArca: SLX): up 147.7% since low; up 95.4% year-to-date
Metals & Mining. These funds track indexes made up of the stock of commodity producers. One argument in favor of investing in hard asset equity ETFs is that you may know a little about a particular commodity, but the person running a company involved in mining or producing that commodity is duty-bound to know a whole lot more. Commodity producers can make brilliant business decisions, and they can also benefit when new mines are discovered. They can also cut costs and boost profits.
- SPDR S&P Metals & Mining (NYSEArca: XME): up 123.1% since low; up 74.3% year-to-date
Basic Materials. Base metal prices have jumped as demand for the metals increase, more notably from China as the country recovers and hoards metals. Base metals should continue their upward journey as fundamentals in a global recovery strengthen.
- iShares Dow Jones U.S. Basic Materials (NYSEArca: IYM): up 100.9% since low; up 58.5% year-to-date
Copper. Copper prices are at their highest levels in 13 months, thanks to both a drooping dollar and concerns about supply of the metal. Prices have doubled this year, mostly because China stepped up its demand as its economy recovered. Analysts also predict that copper will be the top performer among base metals.
- iPath Dow Jones AIG Copper TR Sub Index ETN (NYSEArca: JJC): up 81.3% since low; up 112.7% year-to-date
Commodities have been on a hot streak, but as we’ve learned from recent bubbles, it’s wise to have an exit strategy in the event of a correction.
For full disclosure, Tom Lydon’s clients own shares of IYM.
Max Chen contributed to this article.