A new report from Global X has laid out the case for timely exposure to global commodities.
Research from the ASX ETF provider indicates that commodities could outperform other asset classes over the next 12-24 months.
One way to gain exposure to this future performance is through the Global X Bloomberg Commodity Complex ETF (ASX: BCOM).
Here's three reasons why the BCOM ASX ETF could be an ideal fund for investors looking for global commodity exposure.
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Commodities undervalued
According to Global X, commodities have long been an under-loved corner of the investment universe.
Investors often favouring cashflow-generating assets such as equities and fixed income, citing their higher "predictability" and "fundamentals-driven" nature.
While this perspective is understandable, it is also important to recognise that real assets like commodities, not financial instruments, ultimately power the economy, enable productivity, and sit at the centre of even the most future-facing technologies. In that sense, demand for commodities is itself highly fundamental and persistently anchored in real economic activity.
Global X reported this gap is now beginning to narrow as investors reprice the value of real assets and technology buildouts increase demand for raw materials.
Set for outperformance
According to Global X, commodities remain roughly 20% below their pre-GFC peaks.
The report said they may now be in the process of repricing, triggered by the disruption of the 2020 pandemic, and further reinforced by renewed focus on structural megatrends such as electrification, the transition to clean energy.
Global X said it appears that the outperformance of equities over commodities may be due for a reversal.
Over the past 35 years, an E2C reading of 3.0 or above has reliably signalled a changing of the guard, with commodities often going on to outperform equities sharply over the following 12 to 24 months.
Hedging against conflict
The report also considered past periods of commodity outperformance in inflation regimes, with two themes standing out.
The first is inflationary shocks driven by geopolitical disruption, such as the 2022 Russia Ukraine war.
The second is structural demand booms, most notably in the early 2000s when China's industrialisation, alongside rapid housing and infrastructure construction, drove a powerful surge in global commodity demand.
Today's environment appears to combine elements of both. The war in Iran has the potential to push energy prices higher and, if sustained, could contribute to a hotter for longer inflation environment. At the same time, structural demand drivers are building through the rapid expansion of artificial intelligence, electrification, and other large-scale industrial megatrends.
According to the report, these catalysts are emerging at a time when commodities have anomalously underperformed equities despite a high inflation backdrop, potentially laying the groundwork for a more pronounced catch-up rally and even the emergence of a new commodity "super-cycle."
Commodities ASX ETFs
For investors seeking pure, yet broad-based exposure to commodities, the Global X Bloomberg Commodity Complex ETF may be a compelling option.
It provides direct exposure to a marquee commodity basket through futures contracts.
The fund also aims to maintain exposure to contracts which expire ~3 months in the future, helping minimise negative roll yield by investing further up the curve.
What this means is it gives you diversified exposure to real commodity prices by investing in futures contracts rather than physical goods.
Other commodity focussed ASX ETFs that investors may consider include:
- Global X Physical Precious Metals (ASX: ETPMPM)
- BetaShares Crude Oil Index ETF – Currency Hedged (Synthetic) (ASX: OOO).
