“Commodities are trailing equities for the longest stretch in almost 15 years as Goldman Sachs Group Inc. and Citigroup Inc. predict the end of the decade-long bull market even as the global economy expands.
The Standard & Poor’s GSCI Spot Index of 24 commodities lagged behind the MSCI All-Country World Index for six months, the longest stretch since 1998. Hedge funds cut combined bullishbets across 18 U.S. raw-material futures by 51 percent from a 16-month high in September and are bearish on six of them. Commodities will return 1.6 percent in a year as losses in agriculture and precious metals diminish gains from energy and industrial metals, Goldman said last month.
Investors pulled a record $23.3 billion from commodity funds this year as global equities attracted $182 billion, according to EPFR Global, which tracks money flows. Prices that more than doubled in 10 years spurred expansions at mines, farms and oil fields. Gluts are emerging as the International Monetary Fund predicts global growth of 3.3 percent this year, from 3.2 percent in 2012. The group cut last week its estimates for China, the top consumer of metals, grains and energy.
“There are times when you probably should be avoiding commodities, and I think this is one of them,” said John Stephenson, who helps oversee about C$2.7 billion ($2.61 billion) at First Asset Investment Management Inc. in Toronto. “Anytime you have a whole lot of inventory and visible supply, prices are going to be under pressure. The real issue for commodities is the source of demand, China, is weak.”