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As the world forges a path of progress, commodities - the physical building blocks of the global economy - will see ever-growing demand. Yet from a supply standpoint, climate change narratives and rising needs for infrastructure renewal, coupled with geopolitical risks, set the stage for persistent undersupply in coming years. These forces point to the inclusion of commodity exposure for portfolio resilience.
Commodities is a unique asset class that provides both inflation protection and diversification benefits to investors.
There are multiple ways to factor commodities into one's portfolio. Investors with exposure to commodity futures contracts or managed funds will gain direct albeit volatile exposure to price fluctuations. On the other hand, investors who prefer avoiding outsized earnings volatility can consider long exposure to equities and ETFs of commodity-related sectors across the value chain.
Industrial Metals
Both production and consumption of industrial metals are dominated by the world's largest economies (US, China and the EU). Additionally, transport and construction are multi trillion-dollar industries with wide-ranging end uses and healthy forecasted growth rates.
Soft Commodities
Agricultural commodities remain more relevant than ever as the threat of a “global food crisis” looms on the horizon.
Energy
Burgeoning energy demands, unincentivised upstream producers, and tightly controlled oil and gas fields set the stage for energy commodities to prevail over the next decade.
Gold
Gold is unique as it displays dual characteristics as both a safe haven and a luxury good. The diversity in gold’s functions, combined with its internationally recognised value, make it a strategic commodity to own.
Want to know more on our stock research ideas?
Please visit DBS Treasures website.
Click under “Research” > “What's New” > “Equities to Watch”:
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