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Recovery Year for Commodities

Commodity prices have stabilized over the past 18 months, as dollar-related pressures have eased and value vultures have been drawn in by prices that remain well off cycle highs, notes Argus Research, an independent research firm. “The commodities market bottomed in January 2016, when oil prices were below $30 per barrel and copper was below $4,500 per metric ton, according to the World Bank. Since the lows, oil prices have climbed 135% and copper prices 53%. Yet oil remains 53% below the highs of 2008 and copper 69% below the highs of 2011, and we forecast higher prices for commodities in 2018-2019 as the Brazilian economy recovers and China continues to grow.”

Last year, Argus Research upgraded their sector recommendation to the Basic Materials group to Over-Weight, based on expectations for further commodity price gains and attractive valuations.

“The current market weighting of the sector is 3.0%, and we think investors should consider exposure of 4%-5% in diversified portfolios,” advises the research firm. Analysts recommend well-managed, financially strong industry leaders that are able to take market share during challenging periods for the Chemical, Metals, Ag and Paper industries.

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