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Commodities Post First Gains In Eight Months

Commodities gains signal sign of market turnaround.

After eight consecutive months of decline, the Dow Jones-AIG Commodity Total Return Index gained 3.6% in March. This increase, along with recent gains in the equity market, is being viewed by many as a promising sign that financial markets are approaching recovery, according to a Credit Suisse release.

Reinforcing our view that February represented the beginning of a bottom in the commodities market, March saw the first positive monthly returns in the space since July 2008. Andrew Karsh, Co-Lead Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, said, “We believe this favorable upward move was bolstered by a more positive global economic outlook overall, as well as emerging market views that rising inflation may be on the horizon.” Karsh continued, “As official inflation projections continue to remain low, potential unexpected inflation should be all the more worrisome to investors seeking real returns.”

Co-Lead Portfolio Manager, Christopher Burton, added, “With the U.S. continuing to make direct market purchases in addition to increased stimulus spending, we could see further reinforcement to inflation risk in the future. With commodities prices on the rise, and an increased focus on inflationary tendencies, investors are again looking to commodities for their portfolio diversification and inflation hedging capabilities.”

Overall, Copper was the strongest performer for the month, enjoying returns of 19.92% on news of China’s decision to restock the metal. This brings Copper’s year-to-date performance to 29.79%. Zinc also gained 3.29% primarily due to increased production cuts along with projected growth in infrastructure spending. Natural Gas and Sugar saw the month’s largest declines.

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