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Commodities Beat Most of the Market in 2024 So Far

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

Despite inflationary concerns weighing down on consumption outlook in the Western Hemisphere, the S&P 500 (ticker: SPX) has been rising throughout the course of the Year Till Date (YTD). However, this tide doesn’t necessary raise all boats in quite the same way: “tech” has been attracting a preponderance of investor attention. Furthermore, tech stocks have the largest collective weight among the different types of companies. How these two fact patterns are affecting the index becomes all the more evident when considering the S&P 500 Ex-Information Technology & Communication Services (ticker: SPXXTTSP) – which excludes the two sectors where most “tech” stocks reside – and the S&P 500 Top 50 (ticker: SP5T5) – which simply considers the top 50 stocks in the index.

When divested of most “tech” stocks, the remaining constituents of the S&P 500 underperform relative to broad market. Concurrently, the tech-heavy Top 50 of the S&P 500 significantly outperforms the broad market.

This implies that purchasing the leading constituents of the broad market is a better proposition than the broad market. However, there is a matter of diversification. Instead of equities, commodities have provided an edge via market-beating behaviour in the year. To indicate this, there are four fully-collateralised UCITS-eligible Exchange-Traded Commodities (ETC) that European investors can tap into:

  • The Copper ETC (CULS) which provides a passive total return exposure to U.S.-listed copper futures;

  • The Natural Gas ETC (NGLS) which provides a passive, total return exposure to front-month Natural Gas futures traded on NYMEX;

  • The Brent Oil ETC (1BRN) which provides a passive, total return exposure to front-month Brent Crude Oil futures traded on ICE

  • The WTI Oil ETC (WTI) which provides a passive, total return exposure to front-month WTI Crude Oil futures traded on NYMEX

When considered against the Top 50 of the broad market as well as the bulk of the market minus “tech”, there are some clear outperformers in the commodities space.

As of the 5th of April, Copper outperforms the «ex-tech» market by nearly 2.5% while both Brent and WTI delivered more than 11% in excess returns over the Top 50 constituents of the market. A «warmer than usual» winter in the Northern Hemisphere generally helped tamp down gas prices while inventory levels stayed high. However, there have been a number of periods in the YTD wherein holding Natural Gas on a tactical basis would have yielded substantially higher returns than holding the market in any of the iterations shown.

On an overall basis, the Oil ETCs have shown the most consistent level of performance. This is largely attributable to the fact that OPEC+ oil producers have maintained supply cuts until June (at least) while robust consumption in India, Europe and China pushes up demand. While an oil play seems to have a substantial use case, there is another factor that could be used in the selection of which instrument to use. For instance, if Brent Futures contracts listed in London (LCOM4) were to be compared to the continually-rolled Oil ETCs 1BRN and WTI, the latter outperform the futures contracts themselves.

Despite 1BRN and LCOM being built on the same fuel type, the former has delivered 1.4% in excess returns relative to the latter in the YTD. In other words, there’s always potentially cash being left on the table if the market participant isn’t angling for physical delivery of the underlying but is investing in the futures contracts outright instead of the ETC for a trajectory-driven play.

For professional investors in Europe interested in buying exposure to consumer consumption via commodities, making trajectory plays or seeking diversification to their equity portfolios, these ETCs are highly-viable solutions. Given that they’re also priced reasonably, these ETCs are attractive even when seeking to scale up or scale down exposure.

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

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Violeta Todorova

Senior Research

Violeta se unió a Leverage Shares en septiembre de 2022. Ella gestiona la realización de análisis técnicos, investigación macroeconómica y de acciones, y ofrece información valiosa que ayuda a la definición de estrategias de inversión para los clientes.

Antes de unirse a LS, Violeta trabajó en varias empresas de inversión de alto perfil en Australia, como Tollhurst y Morgans Financial, donde pasó los últimos 12 años de su carrera.

Violeta es una técnica de mercado certificada de la Asociación Australiana de Analistas Técnicos y tiene un Diploma de Postgrado en Finanzas e Inversiones Aplicadas de Kaplan Professional (FINSIA), Australia, donde fue profesora durante varios años.

Julian Manoilov

Marketing Lead
Julián se unió a Leverage Shares en 2018 como parte de la principal expansión de la compañía en Europa del Este. Él es responsable de diseñar estrategias de marketing y promover el conocimiento de la marca.

Oktay Kavrak

Head of Communications and Strategy

Oktay se incorporó en Laverage Shares a fines de 2019. Él es responsable de impulsar el crecimiento del negocio al mantener relaciones clave y desarrollar la actividad de ventas en los mercados de habla inglesa.

Él vino de UniCredit, donde fue gerente de relaciones corporativas para empresas multinacionales. Su experiencia previa es en finanzas corporativas y administración de fondos en empresas como IBM Bulgaria y DeGiro / FundShare.

Oktay tiene una licenciatura en Finanzas y Contabilidad y un certificado de posgrado en formación empresarial de Babson College. También es titular de una certificado CFA (Chartered Financial Analyst).

Sandeep Rao

Investigación

Sandeep se unió a Leverage Shares en septiembre de 2020. Está a cargo de la investigación de líneas de productos existentes y nuevas, clases de activos y estrategias, con un enfoque particular en el análisis de eventos y desarrollos recientes.

Sandeep tiene una larga experiencia en los mercados financieros. Comenzó en un hedge fund con sede en Chicago como ingeniero financiero, su carrera abarcó varios dominios y organizaciones durante un período de 8 años, desde la División de Prime Services de Barclays Capital hasta (más recientemente) el Equipo Index Research de Nasdaq.

Sandeep tiene una maestría en Finanzas, así como un MBA del Illinois Institute of Technology de Chicago.

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