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In this article, we discuss 10 best performing commodity ETFs in 2022. If you want to see more ETFs in this selection, check out 5 Best Performing Commodity ETFs in 2022.
As per a new S&P Global Market Intelligence report, dated November 4, commodities prices for core metals will be hit by the macro backdrop facing the global economy through most of 2023. However, these commodities are positioned to survive the market turbulence in the long-term as they are essential for energy transition. Due to the Inflation Reduction Act being passed, the US renewable energy generation capacity is expected to increase by nearly 150GW in the next few years and global demand for electric vehicles will jump approximately 30% yearly through 2026. This means that metals including copper, lithium, cobalt, and nickel will remain highly demanded.
Global Commodities Outlook 2023
However, the uncertain global economic environment offers a mixed commodities outlook for the year ahead. According to the BMO Capital Markets Commodity Price Index, commodity prices climbed in October after half a year of consistent declines in the wake of Russia’s invasion of Ukraine. Against tighter monetary and fiscal policies, BMO Economics now forecasts global growth to slow from 3.0% in 2022 to 2.3% in 2023, with multiple economies around the world facing at least mild recessions.
For example, BMO Economics expects higher volatility in the energy space in the near-term, given attempts to cap Russian oil prices. Similarly, agricultural prices are impacted by uncertainty around grain exports from Ukraine and softer demand worldwide. In 2023, BMO predicts that aluminum and lumber prices will also be affected due to residential construction headwinds.
Brent crude oil is forecasted to average around $100 per barrel in 2023 and peak at $110, while US West Texas Intermediate (WTI) is expected to average $94 per barrel, as per the Bank of America. BofA also announced its latest forecast for US natural gas and noted that supply will exceed demand, pushing prices down to $4.50, while refusing Russian gas will keep liquified natural gas and coal markets tight.
Brent crude oil prices declined heavily during the third quarter of 2022, with prices in September 2022 averaging 25 percent less than their June highs. The fall in oil prices represents fears about a global recession next year, ongoing pandemic restrictions in China, and meaningful releases from different reserves. However, commodity prices remain high in several countries in domestic currency terms as their currencies have depreciated against the US dollar.
Developments in coal markets have been largely influenced by rampant natural gas prices, which led many countries to transition from natural gas to coal for power generation. Additionally, the European Union’s decision to ban Russian coal also switched up trade flows, as Europe has shifted to Colombia, South Africa, the United States, and even Australia for coal imports. Food commodity prices dropped in Q3 2022 from their all-time highs in April. The plunge was a result of larger-than-anticipated edible and oilseed global supplies during the current season, the UN agreement that enabled Ukrainian grains to be sold in global markets, and slow global growth prospects.
In light of the current global commodities landscape, while equities like Exxon Mobil Corporation (NYSE:XOM), The Mosaic Company (NYSE:MOS), and Newmont Corporation (NYSE:NEM) often make it to investor portfolios, many individuals lean towards exchange traded funds that are managed by professionals. This minimizes portfolio risk and allows exposure to multiple asset classes which are otherwise too advanced for a layman to understand, such as futures, swaps, and other derivatives.
ETF investors have benefited from a rebound in Q4 after the very challenging first three quarters of 2022. ETFs representing the primary asset classes saw positive momentum after the October inflation numbers came in lower than anticipated. ETFs represent 12% of equity assets in the US, 6.8% in Europe, and 3.8% in the Asia Pacific. In the third quarter of 2022, average daily trading volumes for US equities and US ETFs came in at $484 billion and $148.9 billion, respectively. This suggests that US ETFs represented approximately 31% of the total US composite volume in the secondary market over the quarter.
Photo by Francisco Fernandes on Unsplash
Our Methodology
With this industry outlook in mind, we selected the following commodity ETFs based on positive share price gains year-to-date as of December 6. These exchange traded funds trade in oil, natural gas, agriculture, livestock, and precious metals futures.
Best Performing Commodity ETFs in 2022
10. Invesco DB Oil Fund (NYSE:DBO)
YTD Share Price Gain as of December 6: 10.48%
Invesco DB Oil Fund (NYSE:DBO) tracks the performance and investment results of DBIQ Optimum Yield Crude Oil Index, a benchmark comprising crude oil futures contracts. The fund optimizes its contract selection based on the shape of the futures curve to minimize contango, which is a scenario where the futures price of a commodity is greater than the spot price. The fund and the index are rebalanced yearly in November. Invesco DB Oil Fund (NYSE:DBO) offers an expense ratio of 0.77% and it is one of the best performing ETFs to monitor.
In addition to investing in equities like Exxon Mobil Corporation (NYSE:XOM), The Mosaic Company (NYSE:MOS), and Newmont Corporation (NYSE:NEM) for exposure to commodities, smart investors often pick up shares in ETFs which are positioned to deliver gains.
9. First Trust Global Tactical Commodity Strategy Fund (NASDAQ:FTGC)
YTD Share Price Gain as of December 6: 12.55%
First Trust Global Tactical Commodity Strategy Fund (NASDAQ:FTGC) was established on October 22, 2013. First Trust Global Tactical Commodity Strategy Fund (NASDAQ:FTGC) is an actively managed exchange traded fund that seeks total return and a comparatively stable risk profile while offering commodity exposure to investors. The ETF follows the investment results of the Bloomberg Commodity Index. Offering an expense ratio of 0.95%, the fund has net assets of approximately $4 billion. As of December 2, Agricultural, Energy, Industrial Metals, Precious Metals, and Livestock futures represent First Trust Global Tactical Commodity Strategy Fund (NASDAQ:FTGC)’s portfolio composition. The ETF offers a 30-day SEC Yield of 0.78% as of October 31. With shares up over 12% year-to-date on December 6, it is one of the best performing ETFs of 2022.
8. abrdn Bloomberg All Commodity Longer Dated Strategy K-1 Free ETF (NYSE:BCD)
YTD Share Price Gain as of December 6: 15.83%
abrdn Bloomberg All Commodity Longer Dated Strategy K-1 Free ETF (NYSE:BCD) seeks to offer investment results that closely track the performance of the Bloomberg Commodity Index 3 Month Forward Total ReturnSM. The fund was launched on March 30, 2017 and offers annual dividend distributions. abrdn Bloomberg All Commodity Longer Dated Strategy K-1 Free ETF (NYSE:BCD) primarily invests in gold, natural gas, WTI crude, corn, soybean, copper, silver, live cattle, and wheat futures. The total expense ratio came in at 0.35%. With a year-to-date share price gain of nearly 16% as of December 6, abrdn Bloomberg All Commodity Longer Dated Strategy K-1 Free ETF (NYSE:BCD) is one of the best performing ETFs in 2022.
7. Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (NASDAQ:PDBC)
YTD Share Price Gain as of December 6: 16.86%
Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (NASDAQ:PDBC) is an actively managed exchange traded fund that seeks to invest in commodity-linked futures and other financial instruments that offer exposure to the most heavily traded commodities. The benchmark index for Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (NASDAQ:PDBC) is DBIQ Optimum Yield Diversified Commodity Index Excess Return, an index consisting of futures contracts on 14 commodities across the energy, precious metals, industrial metals, and agriculture sectors. The ETF was established in 2014 and offers an expense ratio of 0.64%.
6. Invesco DB Commodity Index Tracking Fund (NYSE:DBC)
YTD Share Price Gain as of December 6: 17.16%
Invesco DB Commodity Index Tracking Fund (NYSE:DBC) seeks to closely correspond to the investment results of the DBIQ Optimum Yield Diversified Commodity Index Excess Return. The ETF is a feasible investment for those who want a cost-efficient method of investing in commodity futures. The underlying benchmark is a rules-based index consisting of futures contracts on 14 of the most widely traded and significant physical commodities in the world.
Invesco DB Commodity Index Tracking Fund (NYSE:DBC) was established in 2006, and it offers a total expense ratio of 0.87%. The year-to-date share price gains of over 17% as of December 6 make Invesco DB Commodity Index Tracking Fund (NYSE:DBC) one of the best performing ETFs of 2022.
Like Exxon Mobil Corporation (NYSE:XOM), The Mosaic Company (NYSE:MOS), and Newmont Corporation (NYSE:NEM), Invesco DB Commodity Index Tracking Fund (NYSE:DBC) is one of the options for investors who are looking for exposure to the commodities sector.
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Disclosure: None. 10 Best Performing Commodity ETFs in 2022 is originally published on Insider Monkey.
