The commodity meltdown that pushed oil to a 12-year low and copper to the cheapest since 2009 isn’t over yet. At least, that’s how hedge funds see it.
Money managers increased their combined net-bearish position across 18 raw materials to the biggest ever, doubling the negative bets in just two weeks. A measure of returns on commodities last week slid to the lowest in at least 25 years. Metals, crops and energy futures all slumped amid supply gluts and an anemic outlook for the global economy.
Market turmoil in China, the biggest commodity buyer, is adding to worries over consumption. A stronger dollar is also eroding the appeal of raw materials as alternative investments.
While Goldman Sachs Group Inc. predicts that the prolonged slump will start to spur more supply cuts, the bank doesn’t expect prices to rebound until later this year.
“There’s fear in the marketplace,” said Lara Magnusen, a La Jolla, California-based portfolio manager at Altegris Investments Inc., which oversees $2.5 billion. People are “very concerned about slower economic growth and what’s going on with China and the contagion effect,” she said.
With a strong U.S. dollar and the Federal Reserve considering more interest-rate increases, “there’s not a lot of places where you can put your money right now,” she said. “Short commodities is a pretty good place.”
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