US tightening proves problematic for commodities

US tightening proves problematic for commodities

A misguided tightening of fiscal policy in the US could see commodities and commodity funds losing some of their steam, multi-asset fund specialists have warned.

Schroders multi-asset investment fund managers Alastair Baker and Patrick Brenne said there was likely to be a continued strengthening of the dollar, which could bode ill for commodity investments if it were not handled properly by policy makers.

In an analyst note from the managers, they said: “If [tightening] is associated with continued positive economic growth then both the US dollar and commodities can go up.

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“But in the event that tightening is a policy mistake, or it exerts so much pressure on emerging market economies that we enter an emerging market crisis phase, with slowing growth and exacerbating the demand for the US dollar, then commodities are likely to suffer.”