Commodities are leaving stocks in the dust

SINGAPORE • Commodities are doing better than stocks this year, living up to predictions that raw materials are well placed to be strong performers in 2021.

By the numbers, a dollar-based gauge of global shares has advanced by 3.8% since the turn of the new year. That’s not bad at all. But a gauge of worldwide commodities from corn to crude is 6.2% ahead. That’s a good deal better.

Under the hood, there’s strength pretty much across the board. Oil’s on an upward arc as stockpiles ebb and OPEC+ maintains its discipline. Corn and soybeans are roaring. Most base metals are higher, too. There are some exceptions, notably gold, which got taken out to the woodshed last Thursday.

Underpinning the advance is the global economy’s vaccine-aided recovery from the hit inflicted by the pandemic.

Commodity hungry China, in particular, has done well.

Central banks still have the spigots wide open, and more US fiscal assistance is in the pipeline. And key materials such as copper are in deficit.

There’ll be some headwinds, of course. These include a stronger dollar, which can put a brake on materials in general. And along the way, stretched relative strength indexes may herald periods of consolidation. But overall, five weeks into 2021, it seems likely that the commodity rally still has some room to run. — Bloomberg