As capital markets brace themselves for rate cuts, more volatility could be ahead as renewed recession fears are spooking investors in traditional asset classes. That said, it could be an opportune time to add agricultural commodities to portfolios.
The S&P 500 has fallen about 3.5% the past month, reaching 5186.33 on Aug. 5 during a particularly heavy sell-off day. With rate cuts looming, economic growth could be stagnating, as revealed by July’s employment numbers.
Moreover, global investment firms Goldman Sachs and JP Morgan are forecasting that “the market-implied odds of an economic downturn have risen materially, judging by signals in the US bond market and to a lesser extent the performance of stocks that are acutely sensitive to the ebbs and flows of the business cycle,” reported Bloomberg.
In addition to recession fears, a forthcoming presidential election should spark additional volatility. Investors are looking to safe haven assets like bonds, gold, or even safe haven sectors like utilities. But they may be overlooking agricultural commodities, which can help during times of heavy market volatility. They can also be beneficial should a recession hit.
“The demand for essential food items tends to remain stable during recessions, as consumers still need to purchase basic food products. This can provide some stability to the agriculture sector, particularly for staple crops like corn and soybeans,” AG Web noted.
One Fund for Diversified Exposure
Rather than opting to get exposure to various agricultural commodities, an easier way is to consider all-encompassing funds that can offer diversified exposure. This is available with th Teucrium Agricultural Fund (TAGS ).
TAGS offers easy ingress to agricultural commodities that can suit both the long- and short-term investor. Furthermore, long-term investors can diversify their portfolios using assets uncorrelated with the broader market. In this case, TAGS offers a perfect complement to a traditional 60/40 stock/bond portfolio in dynamic ETF.
TAGS uses a fund-of-funds structure that incorporates the following Teucrium funds:
Teucrium Corn Fund (CORN )
Teucrium Wheat Fund (WEAT )
Teucrium Soybean Fund (SOYB )
Teucrium Sugar Fund (CANE )
In a current market environment where cost is paramount, TAGS is a compelling option given its low 0.13% expense ratio.
Alternatively, short-term traders can use the fund to play the volatility of ag commodities prices as opposed to holding multiple positions in a variety of ag commodities. TAGS can essentially encapsulate the ag commodities market via one fund.
For more news, information, and analysis, visit the Commodities Channel.
