Chart 45

Ashish LodhAna HarrisFotios Kassianidis

July 15, 2022


While global inflation has accelerated over the last few months, the expectation for some countries is that inflation has peaked while others anticipate further increases (see first chart).


Commodities as inflation hedges

Commodities have typically been seen as potential inflation hedges, given that commodity prices have tended to rise when inflation is accelerating. With this and other scenarios in mind, our regional and country indexes seek to measure the performance of commodity producers in the energy, materials (metals) and industrials (agricultural) sectors. Since inflation began rising in early 2021, the performance of the MSCI World Commodity Producers was strong, but the MSCI Emerging Markets (EM) Commodity Producers started strong and then was fairly muted (see second chart). This year’s EM drop was partially due to Russian-stock underperformance, but there were other fundamental differences between the two indexes.


Sector-composition variances

The MSCI World Commodity Producers Index had a greater weight in commodity producers in the energy sector (63.2%), while its EM counterpart was skewed towards commodity producers in the materials sector (63.7%) that represent the metals and mining industry (55.1%). Increases in prices for commodities in energy and materials occurred in 2021 as global economies started to recover, but recent performance has been more variable. Oil and coal have continued to perform well, but iron and steel prices have faced headwinds as a result of slowing growth in China from fresh lockdowns and rate-hike concerns.


Differences in client base

The two regional-commodity indexes were also quite different from a revenue-generation perspective. Constituents of the MSCI World Commodity Producers Index sourced most of their revenue in the U.S., while emerging-markets producers focused more on China and Brazil. China is the world’s largest consumer of finished steel products and the world’s largest steel producer, primarily by state-owned companies.1


Keeping an eye on inflation

Although commodities may move at times with inflation, central-bank actions are expected to have an impact on global economic growth. Demand for commodities may be impacted If the global economy slows down, although inflation may have not peaked in every region, which could serve as tailwind for commodity prices.

Interactive Assets

Observed and forecasted inflation - OECD

Data as of May 31, 2022.

Cumulative performance

Data as of May 31, 2022.

Chart 45 footnotes


1 The World Steel Organization. “World Steel in Figures, 2022.”

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