Inflation remains stubbornly persistent, which means commodities have had staying power as well. Add to their hedging properties other factors such as constrained supply in many key areas, a massive geopolitical upheaval, and soaring demand for essential metals for AI infrastructure and electrification, and you have a recipe for success in the commodities space.
Of course, commodities are far from interchangeable, and timing in cyclical spaces can be key even during periods of sustained demand. This means that commodities have been highly segmented this year, leading some commodity-focused exchange-traded funds (ETFs) to thrive while others have faltered or stalled, despite fairly strong inflows across the space. Investors must take the time to differentiate among commodity ETFs, not only because so many are available at this point, but also because many could perform very differently as the war in Iran and other important factors continue.
