Typically, Evy Hambro, chief investment officer of BlackRock’s Natural Resources Equity team, said commodities prices have performed well during periods where economic growth and industrial growth is robust and inflationary pressures are increasing.
During these periods, Mr Hambro said he would expect to see demand growth for commodities and, for those commodities that have supply constraints, he would expect to see price increases.
He said: “In an environment where global economic activity is muted or contracting we would expect commodity demand growth to be weak providing little momentum for commodity prices to rise.”
Nicole Vettise, client portfolio manager, JPM Natural Resources fund, said gold and precious metals and their equivalent equity are considered to be the more defensive of commodity exposures in her fund.
However, she said that had not been true regarding gold equities in the last three years.
Gold has suffered from the inability of management to control increasing costs, she said, and to benefit from what should have been increased margins given the increase in the gold price.
Ms Vettise said base metals and diversified stocks (which include iron ore) are considered to be more cyclical so tend to do well in a global growth environment.
In recent years, she said China has been the key source of this growth and this sector has become very sensitive to economic news surrounding China.
Energy stocks are driven much more in the shorter term by stock specific news, particularly around exploration success.
Larger oil companies such as Exxon can do well in poorer markets, Ms Vettise added, behaving as defensive stocks.
