Commodities lead 2019’s market rebound

Commodities have roared back from their end-of-year rout, leading a broad-based rally in risk assets in 2019. This week, Brent crude oil briefly hit $70 a barrel, while iron ore prices breached $90 a tonne. Commodities were the best returning asset class in a banner first quarter which also saw US stocks return to near all-time highs and the Chinese stock market soar. Commodities returned 16.6% in the first quarter, while global equities were up 13.6% and high-yield bonds rose 6.7% Commodities have been boosted by signs of reducing trade friction between the US and China, as well as policy U-turns from major central banks including the Federal Reserve. But the rises come off an unusually low base, following a dramatic fourth-quarter price decline.

The Goldman Sachs Commodities Index, a composite index of commodity sector returns, rose nearly 16% in the three months to March, its best quarter in nearly three years. The burst higher followed a 23% decline in the last three months of 2018. As well as a boost from waning trade tensions, the impact of Chinese stimulus efforts have trickled down into the global supply chain, boosting raw material prices. Policymakers have been ramping up stimulus efforts to try to boost the flagging Chinese economy amid slipping global growth.