Video Viewpoint

Seasoned investment professionals, sector-dedicated analysts, and creative thinkers are at the heart of our business. Get their perspective on today's market climate.

All Videos

Video Transcript

Commodities: Performance Drivers in 2014


YTD Performance Review


ROLAND MORRIS: During the first quarter of 2014 most index products had a fairly positive return, driven in particular by some soft commodities: grains, coffee, and protein. We believe these commodities’ appreciation was driven by some supply problems that were unexpected by the market. We had some severely dry weather in Brazil, which hurt Brazilian grain crops this winter. Additionally, it also hurt the coffee crop. In the U.S. there was a virus in the hog herd, which created extreme tightness in the hog market, and also caused all meats to rise due to substitution. We had very strong performance from those sectors, and that likely drove the majority of positive returns in most index products during the first quarter.


Supply Disruptions


MORRIS: I believe that supply disruptions have been responsible for positive commodity performance for most indexed products. As we look ahead in the year, there's an ongoing supply problem with South African production of platinum, palladium, and gold. They continue to have labor issues, and currently they're not producing. Additionally, Indonesia has disallowed the export of unrefined base metals and that is creating some tightness in the nickel market. These are supply problems that were somewhat unexpected by the market. Furthermore, these supply problems look like they could persist.


On the geopolitical front, if Russian tensions continue to escalate, we're likely to have additional supply problems in base metals, particularly palladium and nickel.


Headwinds in 2014


MORRIS: In the near term commodity demand continues to be somewhat questionable. There are continued concerns about EM growth trends, China in particular. In the longer term we suspect that those economies will rebalance and start to grow at some point later this year or in 2015. I believe it's really a matter of emerging markets adjusting to the U.S. credit cycle, and they're in the process of making that adjustment. It does involve slower growth short term but longer term, we continue to see positive demographics and positive growth trends, which should reignite commodity demand. Additionally, the current supply constraints, particularly with base metals, look to be lasting as the industry overall has had to cut back on what I would call long-cycle commodities in the industrial metals sector. They've cut back on mine development and investments and we're essentially rationalizing future supply. Combine that with longer-term positive trends in emerging markets, we do think commodities will do better over the long haul.


- - - - - - - - - -

IMPORTANT DISCLOSURE


The views and opinions expressed are those of the speaker and are current as of the video’s posting date. Video commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. All performance information is historical and is not a guarantee of future results. For more information about Van Eck Funds, Market Vectors ETFs or fund performance, visit vaneck.com. Any discussion of specific securities mentioned in the video commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index. Information on holdings, performance and indices can be found at vaneck.com


You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. Commodities are assets that have tangible properties, such as oil, metals, and agriculture. Commodities and commodity-linked derivatives may be affected by overall market movements and other factors that affect the value of a particular industry or commodity such as weather, disease, embargoes or political or regulatory developments. The value of a commodity-linked derivative is generally based on price movements of a commodity, a commodity futures contract, a commodity index or other economic variables based on the commodity markets. Derivatives use leverage, which may exaggerate a loss. The Fund is subject to the risks associated with its investments in commodity-linked derivatives, risks of investing in wholly owned subsidiary, risk of tracking error, risks of aggressive investment techniques, leverage risk, derivatives risks, counterparty risks, non-diversification risk, credit risk, concentration risk and market risk. The use of commodity-linked derivatives such as swaps, commodity-linked structured notes and futures entails substantial risks, including risk of loss of a significant portion of their principal value, lack of a secondary market, increased volatility, correlation risk, liquidity risk, interest-rate risk, market risk, credit risk, valuation risk and tax risk. Gains and losses from speculative positions in derivatives may be much greater than the derivative’s cost. At any time, the risk of loss of any individual security held by the Fund could be significantly higher than 50% of the security’s value. Investment in commodity markets may not be suitable for all investors. The Fund’s investment in commodity-linked derivative instruments may subject the fund to greater volatility than investment in traditional securities. For a description of these and other risk considerations, please refer to the Fund’s prospectuses, which should be read carefully before you invest. Again, the Fund offers investors exposure to the broad commodity markets, currently, by investing in commodity-linked swaps.


Investing involves risk, including possible loss of principal. An investor should consider investment objectives, risks, charges and expenses of the investment company carefully before investing. Bonds and bond funds will decrease in value as interest rates rise. Please read the prospectus and summary prospectus carefully before investing.


No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Van Eck Securities Corporation. © 2014 Van Eck Global.


Van Eck Securities Corporation, Distributor

335 Madison Avenue, New York, NY 10017