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rom the late 1990s until the 2008 financial crisis, most commodities experienced double-digit annual real (i.e., inflation-adjusted) price growth, a period known as the commodity “supercycle.” The price of oil rose 1,062%, copper rose 487% and corn rose 240% as growing emerging market demand finally caught up with years of underinvestment in various commodity markets (source: Bloomberg, 31 December 1998 to 30 June 2008). But poor relative performance of commodities to equities year to date has led to some media reports that read like an obituary for the commodity markets. The Economist has even suggested that it is oil demand, rather than oil production, that has peaked and will decline, particularly now that shale has emerged as a viable source of supplies.

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The Author

Nicholas J. Johnson

Portfolio Manager, Commodities

Greg E. Sharenow

Portfolio Manager, Real Assets

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Past performance is not a guarantee or reliable indicator of future results. All investments contain risk and may lose value. Investing in the bond market is subject to certain risks, including market, interest rate, issuer, credit and inflation risk; investments may be worth more or less than the original cost when redeemed. Commodities contain heightened risk, including market, political, regulatory and natural conditions, and may not be suitable for all investors. Derivatives and commodity-linked derivatives may involve certain costs and risks, such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Commodity-linked derivative instruments may involve additional costs and risks such as changes in commodity index volatility or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Investing in derivatives could lose more than the amount invested. The value of most bond strategies and fixed income securities are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and more volatile than securities with shorter durations; bond prices generally fall as interest rates rise.

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China’s Decarbonization Goal Won’t Dent its Appetite for Commodities Any Time Soon
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