Commodities 2018 Set for Refresh Following 2017 Pause
(Bloomberg Intelligence) -- The Bloomberg Commodity Index Total Return increased 3.0% in 2017 with a spot gain of 7.6%. If the dollar weakens further, metals should continue to lead broad-commodity gains in 2018 after a disappointing 2017. The greenback's decline despite the accelerated rate-hike cycle is an indication of a longer-term peak. Demand vs. supply ratios are quite favorable for all three major commodity sectors. Energy's likelihood of continued range-trading higher is subject to further production cuts, though a dependence on supply reductions for price appreciation is fundamentally bearish.
Relying on a continuation of historically above-average production and favorable weather trends is risky business in agriculture -- the sector that's most likely to exceed expectations. Historically depressed and compressed grain prices elevate the risk of a sharp rally.