Investors are betting there’s more to come from commodities after a surge in industrial metals and oil prices.
Assets invested in commodity-linked securities climbed to a four-year high of $311 billion after increasing 1 percent in December, according to Barclays Plc. Net inflows of $3.4 billion outweighed losses of $300 million last month, signaling bullishness.
“Rising manufacturing confidence in many regions continues to spur commodity demand growth,” Warren Russell, a New York-based analyst at Barclays, said in a note to clients. “Strong economic activity is set to continue in 2018.”
The return of global growth, manufacturing output and supply constraints have whetted investor appetites at a time when stock and bond valuations are high. Brent crude topped $70 a barrel in London on Thursday for the first time in three years, just days after zinc touched a 10-year intraday high. Copper’s turn was late last month, when it reached levels last seen almost four years ago.
Still, the big risk for commodities is, as ever, the world’s second-largest economy, Russell said. “China’s expected slowdown should mean that recent strength in oil and copper is unlikely to last.”