Is it time to give up on commodities?

It has taken two years of dismal returns and a regulatory backlash, but the consensus has finally swung round to our long-held scepticism about the “super-cycle” and the diversification benefits of investing in commodities. The danger now is that the pendulum swings too far the other way. A period of faster economic growth and/or higher inflation could see commodities outperform equities and bonds again, even if only temporarily. What’s more, while we do expect renewed weakness in the prices of key commodities such as crude oil and copper in the second half of this year, there are still plenty of others for which the underlying fundamentals are positive.