Market X-Ray: Commodities on a Comeback
Investors weigh the pros and cons of rising interest rates and oil prices.
Market Update
U.S. equity markets moved up slightly this week as investors weighed the pros and cons of rising interest rates and oil prices. U.S. government bond prices continued to fall on inflation concerns. Commodity prices moved up again this week on economic optimism.
The Morningstar US Market Index ended up about 0.6% this week in large part because of strength in large-cap value. The Morningstar Large Value Index finished up nearly 2% on strong stock price increases at Bank of America (BAC) and Alcoa . A handful of large energy firms also saw modest stock price appreciation as a result of another week of higher oil prices.
The Morningstar Mid Growth Index was also up just over 1% this week, continuing growth's hot streak this year. Year to date, the Morningstar Growth Index is now up 17% versus a nearly flat performance for the Morningstar Value Index.
Outside the U.S., equity markets moved up strongly this week. The Morningstar Global Ex US Index finished the week up 2.5% and is now up nearly 17% for the year, double the U.S. equity market return of 7% year to date and underscoring the advantages of country-level diversification.
The Morningstar Core Bond Index finished down 0.6% as government bond prices dropped nearly 1% again this week. Treasury investors continue to debate the outlook for interest rates and inflation in the U.S. as recent economic news appears mixed on many fronts. Higher benchmark Treasury rates are having an effect on mortgage rates, and as those rates go higher, refinancing activity slows. This feedback loop could weigh on any economic recovery in the near term.
The Morningstar Long-Only Commodity Index was up 1.3% for the week on continued strength in energy commodities. Livestock and agricultural commodity prices were lower this week on a strengthening dollar.
| Bond Index One-Week Returns (Data as of 06-11-09) | |||
 | | | |
|
| 1 Wk | Yield | Duration |
| |||
| Core Bond | -0.59 | 3.98 | 4.95 |
 | |||
| US Government Bond | -0.87 | 2.61 | 4.82 |
| |||
| Corporate Bond | 0.25 | 5.74 | 5.77 |
| |||
| Mortgage Bond | -0.78 | 4.36 | 4.64 |
|
| Commodity Index One-Week Returns (Data as of 06-11-09) | ||
| | |
| 1-Week Return % | YTD Return % | |
| ||
| Long-Only Commodity | 1.30 | 16.35 |
| ||
| Long/Flat Commodity | -0.04 | 1.12 |
| ||
| Long/Short Commodity | 0.79 | -6.53 |
|
For more information, call +1 312 384-3735. Daily updates and historical values are available at http://indexes.morningstar.com