Commodity investors should stay diversified China energy crisis shakes up world energy and materials prices, says one market analyst.
Although buyers of exchange-traded funds have invested nearly $ 12 billion in China-based ETFs this year, trying to profit from part of the crisis may not be the best strategy, ETF Trends’ Dave Nadig told CNBC. “ETF Edge” this week.
“What we are really understanding or beginning to understand is the interconnection between energy markets, industrial production and industrial metals, and I think it is a bit difficult to interpret an individual as one of them,” said the chief investment officer and Research director said in Monday’s interview.
For example, him United States Copper Index Fund (CPER) is up more than 4% in the last week as investors try to take advantage of the widely used industrial metal for profit.
“It’s a market that I think requires an iron stomach if you’re trying to make individual calls,” Nadig said. “I think broad, basic exposure is the way to go.”
the GraniteShares Bloomberg Commodity Broad Strategy No K-1 ETF (COMB) fits that description, he said.
A low-cost offering invested in 23 commodity futures spanning the energy, metals and soft commodities markets, COMB’s extensive exposure may be just right for some investors, said GraniteShares Founder and CEO Will Rhind, in the same interview.
“Of course there are other more specific investments like gold, for example, like oil. There are other ways you can be much more specific in terms of targeting different commodities,” said Rhind, whose firm also runs the popular GraniteShares Gold Trust (PUB).
“If you are specifically concerned about energy, if you are concerned about food prices, if you are concerned only about inflation, there are ways to find that in the ETF market,” Rhind said.
Another market analyst suggested avoiding raw materials altogether.
“Don’t try to be a hero,” said Matthew Bartolini, SPDR Americas research chief on State Street, in the same interview.
“Many people have been burned in the past trying to predict the trajectory or pace of different commodity prices, particularly oil, which is so connected to different parts of the world economy, particularly what is happening in China, but also the reopening, “Bartolini said.
Instead, he suggested that investors consider the domino effects of pressures on commodity prices. That could lead to higher inflation and higher prices for consumers, in which case things like inflation-protected Treasury securities could work just fine, he said.
“Don’t try to forecast the unpredictable with so many unknowns in the market and just try to earn a couple of basis points on your bond portfolio, which is really hard to do these days,” Bartolini said.