Should you invest in commodities like oil, gold, and food in 2022?

With stocks and bonds down in 2022 and inflation over 9%, commodities are about the only asset class with a positive return.

Should you invest in commodities?

Show Notes:

• Charlie Bilello – S&P 500 Data & 10 Year Treasury 1928-2022
• S&P Through Recessions: @DayHagan_Invest
• U.S. Inflation at 9.1%

• 

Full transcript:

SPEAKERS

Alex Okugawa & Anthony Saffer

Alex Okugawa 0:00
Should you invest in commodities like oil, gold, and food, with stocks and bonds down here in 2022, and inflation, over 9%… Commodities are about the only asset class with a positive return.

Hey there, it’s Alex and Anthony from One Degree Advisors. If you’re new here we are Certified Financial Planners that help folks with all things tax, retirement, and investment related. So, Anthony, we’re here in 2022, stocks and bonds are down, it pretty much seems like everything is except for commodities. So a question we’ve been hearing a lot from folks and clients is, you know, should I be loading up on things like commodities, gold oil, food? And I think it’s a fair question. But like you and I were talking earlier, it’s first good to start with some context. So context number one, dive into it.

Anthony Saffer 0:53
Yes, stocks and bonds, I mean, as major asset classes, often pair very well together. Because a lot of times when stocks are down, people go to the safe haven of bonds. But that’s not what’s happening this year. In fact, Charlie BillyOh put up a good chart, where stocks and bonds combined together in a traditional 60% 40% allocation portfolio. It’s the worst year that we’ve had since the 1930s.

Alex Okugawa 1:17
I mean, this is really frustrating, right? Because again, a lot of people that go to the stocks and bonds expect when markets go down bonds are going to be there to protect them. And when that doesn’t mean, that’s not the case, that’s incredibly frustrating. But let’s dive into context number two, which is, you know, kind of like, talking about inflation.

Anthony Saffer 1:32
Yeah. So I mean, that is one of the major circumstances right now, economically is inflation, June numbers 9.1%, really high. So all the things that we’re paying more for. So think about gas, food, rent, these types of things that can go along with commodities, people are looking at the investment markets are at their portfolios, if they already hold commodities, and saying, Hey, that’s the only consolation I’m getting in a year where almost everything is down.

Alex Okugawa 1:59
So again, going back to the question, should I invest in commodities? We have two main takeaways here. And the first is sometimes that stocks lead the economy.

Anthony Saffer 2:10
Yeah, that’s right. So if you look at history in stocks often go down before the recession starts. So it’s arguable, like, are we in a recession right now? Or is it coming, the odds seem to be much more probable that that’s happening one way or the other stocks have been down for a while. But we’ll put up this chart here that shows that the stock market tends to bottom and starts to recover, on average, four months before the recession is over. So if you define a recession as two-quarters of a down economy, that means that the stock market’s actually recovering a lot of times in the first half of August.

Alex Okugawa 2:47
That’s really confusing for investors, right? Because what’s going to what could happen, at least what’s happened a lot historically, is some of the worst economic data will be coming out and the stock market’s already going to be in recovery mode. We saw a little bit of that in March of 2020 during COVID times, right? March, I think was March 23rd. Correct me if I’m wrong was really the bottom of the stock market and things were on their upward trajectory after that. But at the same time, some of the worst economic data was coming out in March 2020 with things slowing down supply chains the virus so it’s really confusing for people knowing that the worst data might be yet to come yet we might already be in recovery for stocks alright takeaway #2 which is commodities can be unloved.

Anthony Saffer 3:33
Yeah, so where commodities have done so well. There are just major stretches of time where commodities can really be unloved. We’ll put up this chart here and it shows it from February Oh, six to now in order to show a couple of peaks. But then you look at that big, messy, murky middle there where just commodities were very unloved, that middle stretch, it just wasn’t quite as rosy as it is, lately.

Alex Okugawa 3:55
Yeah. And that’s the thing, you know, if you’re going to invest in commodities, I mean, at least we prefer to invest in commodities overlaid with like a tactical strategy that it’s designed to help you maybe get in and out of it. Again, it’s not a silver bullet, but it may help protect against some of these big major swings that you will least historically have seen in commodities.

Anthony Saffer 4:16
right? Yeah. And so what we want to take away from that is maybe stocks could be recovering at any point in time even if the news is bad we were not predicting that it’s just that it very well could happen. Commodities at the same time may have run their course we don’t know that. So having some exposure, maybe in a more trend-following type of strategy can make a lot of sense. The biggest thing is to be diversified. Have a plan, and make sure it aligns with your overall financial plan.

Alex Okugawa 4:41
And now let us know what you think. Are you investing in commodities or are you including them in your broader investment plan? Let us know in the comments down below. And if you enjoyed today’s video, please like and subscribe for more. Thanks for watching.

Transcribed by https://otter.ai

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