The first week of May, 2011, saw a broad commodities sell off, with commodity futures falling almost 7% and stocks linked to commodities down 5% from April 27, 2011 through May 5, 2011.1 Is this the end of the line for the bull market in commodities or just another stop along the way? Viewpoints caught up with Joe Wickwire, manager of Fidelity Global Commodity Stock Fund® (FFGCX | Get Prospectus
), for his thoughts on the recent sell off, and what it may mean for investors. What has been behind the recent sell off?
I think what we have been seeing recently has been a correction within the long-term, secular bull market for commodities that began in 2000 after commodities had been in a secular bear market for approximately twenty years. Commodities have broadly fallen about 7% off their high at the end of April. Corrections of this magnitude happen fairly often in the commodities space. We’ve now seen five corrections of 7% or more since the beginning of 2010. In my opinion, the world and markets will probably continue to stay incrementally more volatile than most people would like and probably on an order of magnitude greater than what people have been used to since the 1980s. In a world that today is still dealing with a great deal of uncertainty and has many different market participants who can have very dissimilar profiles and time horizons, I think it is useful to realize that violent swings—both to the upside and the downside (rallies and corrections)—could be part of the new normal. As I have stated before, I don’t think you should let short-term volatility alter your long-term investment program. The reasons articulated by “talking-heads” for each rally or correction are usually varied, are usually opinions versus facts, and are usually not all encompassing. So how should investors react?
I believe that if you have a long-term investment strategy, very rarely do you need to actually “react” to any short-term market volatility. If...
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