Commodities Look Attractive In This Late Business Cycle - USCF
(Kitco News) - It makes sense to hold somecommodities in a diversified portfolio in this late stage of a business cycle,according to one commodity fund manager.
In an interview with Kitco News JohnLove, president and CEO of USCF said that he sees positive long-term prospectsfor broad commodities, as equity markets appear to be reaching their pinnacle.
“We’ve had a tremendous bull market,but the question is, can it last,” he said. “This is when you want to beholding some commodities because of their low correlation to stocks.”
Love added that higher inflationpressures also make commodity assets more attractive. The CEO’s comments comeas the Federal Reserve, following its monetary policy decision, said that itsees inflation rising 2.1% in 2018.
“As inflation starts to rise that iswhen you will see commodities start to shine,” he added.
As to what commodities have the mostpotential, Love said that in an environment of continued global growth andrising inflation expectations, base metals look attractive.
Currently the firm’s broad-commodityindex fund, USCI, holds a total of $148.3 million in zinc, nickel and lead futures. Zinc is the fund’s second biggest single allocation at $50.3 million,only behind $51.4 million in cotton.
Love added that base metals areattractive because of a major imbalances in the markets supply and demandfundamentals. Even if demand were to drop because of lower trade due to risingprotectionist policies around the world, Love said that he would expect lowsupplies to continue to support prices in the near-term.
The Fund is also heavily invested inenergy markets, with a total of $237.30 million in broad energy futures.
While Love sees potential for a broad-commoditybasket, the USCI has little love for gold.
The fund holds only a minimal amountof gold in its portfolio, valued at $47.6 million. According to the fund’srules it has to have an allocation in all major commodity asset classes.
Personally, Love said he is somewhat surprisedthat gold prices are not higher considering the current environment of growinggeopolitical uncertainty and global trade war.
He added that the scenario where goldwould perform well in his fund’s portfolio would be an environment of weakeconomic growth and high inflation pressures.
“I think if growth were to slow and wesaw an increase in stock volatility, then I think gold would be the ‘go-to’investment,” he said.
By Neils ChristensenFor Kitco News
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nchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.