Hello, and welcome to the Morningstar series, "Ask the Expert."
I'm Emma Wall and I'm joined today by Fund Analyst for Morningstar, Fatima Khizou, to
talk about commodities.
Hi, Fatima Hi, Emma.
So, after five very long and hard years for commodities we've had a bit of a rebound in
2016, haven't we?
Yes, certainly, Emma, it's been an interesting year for the commodities sector and we've
seen since January which marked low bottom for so many commodities, we've seen the sector
bounce off strongly from those levels and actually, the natural resources related equities
have outperformed the broader equity and fixed income markets so far this year.
So, it's been an interesting year so far.
And then drilling down into those commodities, we've got to talk about gold.
It's an investor favorite.
How has gold done in 2016?
Gold actually has been the star performer this year and there are many reasons that
explain such stronger returns.
Predominantly, the uncertainty around the global economy this year, but also political
events and also the diminishing probability of interest rate hikes in the U.S.
As you remember, at the start of the year, the markets priced in four interest rate hikes
in the U.S. and as we got on over the months, that probability has diminished and we saw
a flight into that safe heaven assets for many investors and the demand has increased
substantially this year.
And other factor that actually explains that return of trust from investors is that we've
seen many companies in the sector seen their financial states improve significantly from
periods in '12-'13 and that has also helped drive gold higher.
I'm looking then at a couple of days where gold spiked.
We saw gold spike after Brexit and recently, this week, we saw the price of gold spike
after the election of Donald Trump for the next U.S. President.
What then looking at another commodity, at energy, because this has been quite a volatile
year for the oil price, but it has moved up, hasn't it?
Yeah, energy is another sector that has been continued to make headlines this year and
we've seen that downward trend that started in June '14 and we've seen the prices bottom
up to below '13 January.
However, we've seen a return or reverse of that trend over the past few months and actually
the sector is up this year and there's a lot factors that have helped on the supply side
but also on the demand side.
The freeze in February announced by the OPEC has helped.
And more recently, the announcement by OPEC again to cut production has further helped
this sector and the prices in that upward trajectory.
The demand is also strong and we've seen the production fall in U.S. as well and all those
developments have helped the prices in that sector.
So, if investors are still feeling bullish about the commodities sector, which funds
do we rate highly that can offer them exposure to this space?
We have quite a good selection in that area.
So, if investor wants really exposure to gold equities, we have the BlackRock Gold and General,
which is run by an experienced manager in that field.
Within energy, we have Guinness Global Energy, which is also managed by a highly experienced
team.
And if investors wish to access the over complex, there is First State Global Resources, which
we highly rate as well or JP Morgan Global Resources, which is more a smaller-cap fund.
So, there's quite a good selection.
Fatima, thank you very much.
Thank you, Emma.
This is Emma Wall for Morningstar.
Thank you for watching.