The events in Ukraine - a nation on no one's radar a few months ago - underscore the unpredictability of, but also the opportunities from, investing in physical assets. The incursion into Crimea and encirclement of Ukraine military bases by Russian troops sent commodity prices to six-month highs. Ukraine, according to USDA, is the world's fifth-largest wheat exporter and third-largest corn exporter. Ukraine was previously forecast to export 10 million tonnes of wheat this year, but the military crisis could disrupt transportation. Russia is estimated to sit on one-quarter of the world's natural gas reserves. Russian natural gas is shipped to customers in Europe via pipelines through Ukraine.
During the year-end 2013 stock rally, investors who thought stocks were getting overpriced stayed along for the ride because they had nowhere else to go - certainly not to the bond market amid rising rates. Commodities were already in a rising trend
While most everyone in the investment world has been focused like a laser beam on the amazing U.S. stock market, some subtle shifts are happening that could have major implications for investors. These shifts are not large yet, but they are significant if they are the beginning of a trend. For the last couple of years the investment landscape has been dominated by a stable to stronger U.S. Dollar, an expectation of stronger U.S. growth - largely unmet - and rising U.S. stocks. That may be in the process of changing.
With all the attention on new records for the S&P 500 you might not have noticed that the two year old downtrend in commodities appears to have come to an end. The CRB index, a broad measure of commodity prices, has been trending lower since early 2011 and while some of that is no doubt due to weaker growth
In each month's ISM Manufacturing and Non-Manufacturing reports, respondents to the survey are asked whether or not they are seeing an increase or decrease in the prices of commodities they deal with. In this month's survey on the manufacturing sector, there was a notable uptick in the number of commodities that were rising in price. According to the report, respondents noted price increases in 15 different commodities, which was the highest since last February and up from nine in January. This also marked the fourth straight month where no commodities were showing up as falling in price.
The chart below shows the monthly net reading in the number of commodities rising in price going back to 1999 on a three month moving average basis. As shown in the chart, the net number has seen a moderate increase in the last few months and currently stands at 8.7, which is the