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The S&P GSCI fell 0.8% in April as the Fed’s preferred measure of inflation, Personal Consumption Expenditures (PCE), fell slightly on a year-over-year basis to 4.6%. Continued elevated readings of inflation, albeit cooling, led to market expectations that the Fed would hike rates again in May to bring inflation back to its 2% target. Commodities are generally good inflation hedges because they tend to move with changes in inflation to the upside and, most recently, to the downside.

Within the broad S&P GSCI benchmark, several commodity sectors declined, with the S&P GSCI Industrial Metals falling the most, down 3.0%. The S&P GSCI Copper and the S&P GSCI Zinc dragged down performance, as China’s Politburo stated their economy is still in a recovery phase, which will require continued fiscal and monetary support due to insufficient domestic demand. Expectations for China’s industrial sector to pick up on the demand side have not come to fruition yet, and recent issues with trade relations between Australia and China have not helped the industrial metals space.

The S&P GSCI Agriculture was the second-worst-performing sector, down 2.9% in April, with the S&P GSCI Grains the lowest performer, down 6.9%. Corn, soy and wheat were all dragged lower owing to strong crop progress and waning demand, as the U.S. Department of Agriculture said private exporters recently canceled several hundred thousand tons of corn. Brazil has a massive corn crop this year, and their less expensive crop has weighed on U.S. grain prices. The S&P GSCI Softs rose 12.3%, powered by the S&P GSCI Sugar, which rose 22.1% to a new 10-year high.

Competing forces were at play for the S&P GSCI Energy, leading to flat performance for the month. This sector constitutes more than half of the weight in the headline S&P GSCI and tends to have the highest inflation beta (or sensitivity to changes in inflation) of all commodities. Our recently launched S&P GSCI Climate Aware is the first-to-market commodities benchmark incorporating environmental considerations, and currently has a third of its weight toward energy commodities.

The S&P GSCI Gold flirted with a new all-time high as the U.S. dollar moved lower and uncertainty across markets led to a safe-haven bid.

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