March 2017

Broad commodities, pressured in 1Q by mean-reversion weakness in energy yet supported by the same in the U.S. dollar, will likely be about which, if either, of these dominant factors becomes a new trend for the rest of 2017. Unchanged on a spot basis and with a minus 2.3% total return in 1Q, the Bloomberg Commodity Index reflects a market in transition. If energy stabilizes along with a potential dollar peak, supply and demand trends favor further appreciation in broad commodities. Metals should remain the shining stars with favorable fundamentals. Precious metals performance surpassing industrials is a potential macroeconomic concern. Agriculture remains a weather blip away from recovery. Record demand, due to lower prices and multiyear bumper crops, is due for normalization.