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Quarter-End Insights

Agriculture, Chemicals Appeal in Basic Materials

We expect potash demand to grow over the next several years in basic materials.

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The Morningstar US Basic Materials Index outperformed the broader market during the fourth quarter of 2020 by 220 basis points. Year to date, the sector has still underperformed the Morningstar US Market Index by roughly 150 basis points, though this is an improvement from an underperformance of roughly 475 basis points through the first three quarters of the year. Trailing one-year underperformance improved to 50 basis points, down from 430 basis points a quarter ago. As a result of the 2020 rally, less than 20% of the U.S. basic materials stocks we cover now trade in 4-star territory and no stocks trade in 5-star territory. However, we think investors can still find attractive long-term opportunities in the agriculture and chemicals industries.

U.S. materials index versus the U.S. equity index - Morningstar

Seth Goldstein does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.