Commodities - The Basics

We continue our exploration of the four main asset classes, this time focusing on the building block that makes up the physical inputs to the economy: commodities. Fluctuations in commodity prices can have massive ripple effects across every corner of the financial ecosystem, but as one of the most idiosyncratic asset classes, commodities also provide interesting opportunities for diversification and uncorrelated returns during periods when both fixed income and equities struggle. Here, we explain this contradictory nature of commodity interconnectedness and idiosyncrasy with the other asset classes; the links between commodities, the dollar, and inflation; and why even if commodities don’t make it into your portfolio, they can still provide incredible information as macro indicators.