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Ever since financial crisis, prices of basic crops, fuels and industrial metals have moved in sync with one another. They have also somewhat correlated with stock markets for a long period of time, which is should not be. Commodities prices should be driven by supply and demand.

In today’s Wall Street Journal, Commodities’ Paths Diverge, Michael Lewis, global head of commodities research for Deutsche Bank said, “The physical fundamentals have come back for commodities.” It is interesting to see from the chart below that “Commodities are starting to behave like commodities again”

Commodities are starting to behave like commodities again (WSJ)

With lower correlation with other markets, investors can start to diversify their portfolios without compromising the returns.

About the Author

Ivan Guan is the author of the popular book "FIRE Your Retirement". He is an independent financial adviser with more than a decade of knowledge and experience in providing financial advisory services to both individuals and businesses. He specializes in investment planning and portfolio management for early retirement. His blog provides practical financial tips, strategies and resources to help people achieve financial freedom. Follow his Telegram Channel to join the FIRE community.
The views and opinions expressed in this article are those of the author. This does not reflect the official position of any agency, organization, employer or company. Refer to full disclaimers here.

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