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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 è entrata a far parte di Leverage Shares nel settembre 2022. È responsabile dello svolgimento di analisi tecniche e ricerche macroeconomiche ed azionarie, fornendo pregiate informazioni per aiutare a definire le strategie di investimento per i clienti.

Prima di cominciare con LS, Violeta ha lavorato presso diverse società di investimento di alto profilo in Australia, come Tollhurst e Morgans Financial, dove ha trascorso gli ultimi 12 anni della sua carriera.

Violeta è un tecnico di mercato certificato dall’Australian Technical Analysts Association e ha conseguito un diploma post-laurea in finanza applicata e investimenti presso Kaplan Professional (FINSIA), Australia, dove è stata docente per diversi anni.

Julian Manoilov

Marketing Lead

Julian è entrato a far parte di Leverage Shares nel 2018 come parte della prima espansione della società in Europa orientale. È responsabile della progettazione di strategie di marketing e della promozione della notorietà del marchio.

Oktay Kavrak

Head of Communications and Strategy

Oktay è entrato a far parte di Leverage Shares alla fine del 2019. È responsabile della crescita aziendale, mantenendo relazioni chiave e sviluppando attività di vendita nei mercati di lingua inglese.

È entrato in LS da UniCredit, dove è stato responsabile delle relazioni aziendali per le multinazionali. La sua precedente esperienza è in finanza aziendale e amministrazione di fondi in società come IBM Bulgaria e DeGiro / FundShare.

Oktay ha conseguito una laurea in Finanza e contabilità ed un certificato post-laurea in Imprenditoria presso il Babson College. Ha ottenuto anche la certificazione CFA.

Sandeep Rao

Research
Sandeep è entrato a far parte di Leverage Shares nel settembre 2020. È responsabile della ricerca sulle linee di prodotto esistenti e nuove, su asset class e strategie, con particolare riguardo all’analisi degli eventi attuali ed i loro sviluppi. Sandeep ha una lunga esperienza nei mercati finanziari. Iniziata in un hedge fund di Chicago come ingegnere finanziario, la sua carriera è proseguita in numerose società ed organizzazioni, nel corso di 8 anni – da Barclays (Capital’s Prime Services Division) al più recente Index Research Team di Nasdaq. Sandeep detiene un M.S. in Finanza ed un MBA all’Illinois Institute of Technology di Chicago.

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