With inflation likely to persist in 2021, many analysts believe that commodities should generally outperform in the coming year — a sentiment that I echo, notes Clif Droke, editor of Sector Xpress Gold & Metals Advisor.
Based on that premise, my top pick for 2022 is the Invesco DB Commodity Index Tracking Fund (DBC), an actively traded index ETF which is based on several major commodity futures contracts ranging from metals (including gold, silver and copper) to grains (including corn, wheat and soybeans) to energy products (including oil and natural gas).
Food prices in particular have been in the spotlight in recent months, with overall meat prices in in the U.S. in late 2021 up 21% from a year ago. Underscoring the extent of food price inflation, the Bureau of Labor Statistics noted that its food at home index posted its largest 12-month increase in nearly 14 years!
Consequently, a combination of strong global demand for ag commodities, exceptionally volatile weather in many food growing regions around the globe and rising input costs (i.e. fuel and fertilizer) should contribute to rising prices in the ag sector in 2022.
Additionally, crude oil prices are expected to remain elevated in the coming year, and for that reason, I expect DBC — which is heavily skewed toward the energy sector — to be one of the top performers in the new year.