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Commodities Decreased on Dampened Global Growth Expectations

Commodities decreased as a lower global growth outlook reduced the demand expectations for crude oil and base metals.


The Bloomberg Commodity Index Total Return decreased for the month, with 19 out of 22 constituents posting losses.

Credit Suisse Asset Management observed the following:

  • Energy declined 18.74%, led lower by Natural Gas, as warmer-than-expected temperatures within the US reduced heating demand amid seasonally low inventory levels.
  • Industrial Metals decreased 5.12% as skepticism surrounding the ability to timely renegotiate the terms of a new agreement between the US and China remained by the end of December, keeping demand expectations for base metals low.
  • Agriculture fell 2.39%, led down by Cotton, due to reduced consumption forecasts from Asia, strong production in China with the help of government subsidies and low US export demand.
  • Livestock eased 0.89%, led down by Lean Hogs, after the USDA reported strong US hog production and higher-than-expected frozen pork inventories.
  • Precious Metals increased 5.75% as weakness in global equity markets along with a partial US government shutdown increased safe haven demand for Gold and Silver, along with the outlook for less aggressive monetary tightening.

Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management, said: “After the Group of 20 meeting in Argentina, the US and China began a three-month break from enacting additional tariffs and to resume trade negotiations. If the two nations can make significant compromises in the coming months, then this may be supportive of global economic growth. 2019 may also bring new risks to crude oil supplies. Nigeria and Libya will hold major elections this year and the potential for civil unrest due to potential political transitions may disrupt oil production as it has in the past. In addition, output reductions from OPEC and its partners, including a reduction of oil exports to the US may alter the supply/demand balance. The market also awaits data to assess compliance by those countries who received Iranian oil import waivers from the US. If it is deemed that these countries failed to adhere to the stipulations surrounding the sanctions, then the US may further tighten restrictions around Iranian oil exports to these countries.”

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added: “As global growth expectations weakened over the past few months, central banks may implement additional policy measures in support of economic progression. Trade tensions with the US have pressured China’s economy as its manufacturing activity contracted in December. In response, the Chinese government intends to enact more fiscal measures to support its housing and manufacturing industries. The ECB announced it will maintain its key interest rate below 0% at least through mid-2019 amid a slowing economy. And, the US Fed seemed to suggest it will follow a slower pace of rate hikes in 2019 in light of uncertainty regarding future global growth. However, US labor and wage data appear to remain strong. The cautious actions exhibited by central banks as the global economy shifts from monetary easing to a tightening cycle may be supportive of global economic activity as well as commodity demand.”

About the Credit Suisse Total Commodity Return Strategy

Credit Suisse’s Total Commodity Return Strategy is managed by a team with over 35 years of combined experience, and seeks to outperform the return of a commodities index, such as the Bloomberg Commodity Index Total Return or the S&P GSCI Total Return Index, using both a quantitative and qualitative commodity research process. Commodity index total returns are achieved through:

  • Spot Return: price return on specified commodity futures contracts;
  • Roll Yield: impact due to migration of futures positions from near to far contracts; and
  • Collateral Yield: return earned on collateral for the futures.

As of December 31, 2018, the Team managed approximately USD 7.6 billion in assets globally.

Credit Suisse

Credit Suisse AG is one of the world’s leading financial services providers and is part of the Credit Suisse group of companies (referred to here as ’Credit Suisse’). Our strategy builds on Credit Suisse’s core strengths: its position as a leading wealth manager, its specialist investment banking capabilities and its strong presence in our home market of Switzerland. We seek to follow a balanced approach to wealth management, aiming to capitalize on both the large pool of wealth within mature markets as well as the significant growth in wealth in Asia Pacific and other emerging markets, while also serving key developed markets with an emphasis on Switzerland. Credit Suisse employs approximately 45‘560 people. The registered shares (CSGN) of Credit Suisse AG’s parent company, Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. Further information about Credit Suisse can be found at

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This document was produced by and the opinions expressed are those of Credit Suisse as of the date of writing and are subject to change. It has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of Credit Suisse to any person to buy or sell any security. Any reference to past performance is not necessarily a guide to the future. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable but Credit Suisse does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof.

Certain information contained in this document constitutes “Forward-Looking Statements” (including observations about markets and industry and regulatory trends as of the original date of this document), which can be identified by the use of forward-looking terminology such as “may”, “will”, “should”, “expect”, “anticipate”, “target”, “project”, “estimate”, “intend”, “continue” or “believe”, or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties beyond our control, actual events, results or performance may differ materially from those reflected or contemplated in such forward-looking statements. Readers are cautioned not to place undue reliance on such statements. Credit Suisse has no obligation to update any of the forward-looking statements in this document.

Certain risks relating to investing in Commodities and Commodity-Linked Investments: Exposure to commodity markets should only form a small part of a diversified portfolio. Investment in commodity markets may not be suitable for all investors. Commodity investments will be affected by changes in overall market movements, commodity volatility, exchange-rate movements, changes in interest rates, and factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Commodity markets are highly volatile. The risk of loss in commodities and commodity-linked investments can be substantial. There is generally a high degree of leverage in commodity investing that can significantly magnify losses. Gains or losses from speculative derivative positions may be much greater than the derivative’s original cost. An investment in commodities is not a complete investment program and should represent only a portion of an investor’s portfolio management strategy.

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