April was another positive month for Commodities. They outperformed both Equities and Fixed Income and continued the trend of providing strong diversification benefits established in the first quarter of 2018 (Quarterly Update ). The rally in April was very broad as all three of the sectors including 26 of the 38 components in the RICI® were positive. In terms of the sectors, Energy led the way up +5.79% followed by Agriculture up +1.98% and metals up +1.63%.

               Source Bloomberg LP and Barclay’s Map

Commodities and Rising Rates

An important benefit of Commodities that investors should keep in mind is the non-correlation to both Equities AND Fixed Income. In fact, as show below, Commodities have tended to have a slightly negative correlation to Bonds. A Commodity allocation, when added to an Equity and Bond portfolio, can lower the overall volatility particularly during rising rate environments.

24 Month Rolling Correlation: Barclay U.S. Agg to RICI® 

(August 1998 to April 2018)

                  Source Bloomberg LP and Barclay’s Map



Alan Konn

Partner & Managing Director of Price Asset Management