What's been Driving Commodities' Growth in 2025
As a group, commodities continue to be top performers this year, beating stocks, bonds, and global real estate. It's also lifted the performance of the USCF Summer Haven Dynamic Commodity Strategy ETF, a no K1 Fund, and that ticker is SDCI. The fund has also garnered an impressive five-star rating from Morningstar.
What has been driving SDCI's gains, and what type of investor might SDCI appeal to? Since 2020, a couple of things have been going on. One, there are just individual stories within commodity baskets, such as cocoa last year. People don't think about cocoa; they think about crude oil and maybe coffee or copper, but they don't think about these smaller commodities. There are a lot of supply and demand individual stories there that drive commodities.
Also, as a whole, a couple of other things are happening. Inflation has been higher than it was in the past. In addition to that, the US dollar has also been a major factor. The dollar generally has a negative correlation to commodities because commodities are priced in dollars. You can almost think of it as an exchange rate that creates more demand for commodities priced in dollars when the dollar is lower. So that has aided commodities as well. Then there's just a shortage of some things relative to need, and that continues to be the case.
That's driving commodities in terms of who SDCI might appeal to. Obviously, you have to look at whether it's suitable for your portfolio by yourself or with your financial advisor. But I think it's worth everyone considering, at least for two reasons. One, it provides diversification from stocks and bonds, and people are really looking for that right now. We're getting more calls than we ever have because people are looking for an alternative to stocks and bonds, with stocks being so elevated and interest rates being where they are. Looking at 2022, when both stocks and bonds declined simultaneously, people recognize that maybe some other forms of diversification are beneficial.
On top of that, people tend to look at commodities and think, "Oh, they're risky. They're very volatile." But over the long term, a commodity basket tends to have risk about equal to stocks. So, it's not necessarily as risky as people think. Individual commodities, yes, just like an individual stock, if something happens to a company or something happens to a commodity, you can have big changes in the commodity price. But as a basket, we tend to see volatility that's comparable to stock indices over time.
