Commodities Commodities Commodities

Commodities and defence baskets top 2022 performance

Søren Otto Simonsen

Senior Investment Editor

Summary:  The situation in Ukraine continues to dominate our equity baskets’ performance, as commodities and defence tops the list for 2022.


2022 has been a challenging year. That rings especially true for the financial markets, where hefty inflation, climbing interest rates, supply chain squeezes, COVID lockdowns and not least uncertainty from the Ukraine crisis make investors scratch their heads.
Our collection of relevant investment themes, referred to as our equity baskets, put together by our Head of equity strategy, Peter Garnry are examples of this. Only two baskets post double-digit returns in 2022 and the travel basket is in a slight plus. “It’s been a tough year so far for equity markets. With everything that’s been thrown at investors it’s almost impressive that markets haven’t fallen further,” says Garnry.

The two outperforming baskets are commodities and defence. While a lot is going on financially, the strong performances are effects of the crisis in Ukraine. “The terrible situation in Ukraine has catapulted defence stocks into relevancy as countries like Germany will rapidly increase military spending in the coming years” says Garnry and adds that “the Ukraine crisis has extended the bull-run in commodities dominated by oil and gas as the European Union aims to become independent of Russian energy. The unfortunate rising risk of a global food crisis means that food commodities have also increased in price recently.”

Among the top performers in the commodity basket is the American mining company The Mosaic Company and the American Big Four oil company Exxon Mobil. 
Within defence, the German arms manufacturer Rheinmetall AG leads the flock. The French producer of electrical defence systems, Thales, French Dassault Aviation and the Swedish defence company and former car producer, Saab, have also performed well.

Saxo equity themes performance overview
Basket2022 performance (%)
Commodities33.1
Defence21.9
Travel1.3
Logistics
-3.7
India (GDRs) -3.7
Renewable energy-4.8
Cyber security-6.1
Women in leadership-9.1
Financial trading-11.2
Mega caps-11.2
3D printing-12.4
Gaming-19.5
Payments-19.5
Green transformation-24
Energy storage-25.2
Semiconductors-25.4
China consumer & technology-26.5
NextGen medicine-29.8
Crypto & blockchain-31.5
China's little giants-32.5
Bubble stocks-35.9
E-commerce-42.2
Data from 22. April 2022
Source: Bloomberg and Saxo

Will the future hold more of the same?

Garnry believes that the Ukraine conflict will continue to play a role in basket performance. “With everything going on in the world, and especially in Ukraine, commodities as an asset class is primed to continue to be enormously important for investors amid the new inflation regime. The same goes for defence stocks,” he says. 

The conflict means the cyber security basket could move up in rank. “What we have seen is that online presence plays a significant role in conflicts these days. Therefore there’s reasons to think that people, companies and countries alike will strengthen their online security in the coming months and years,” Garnry says.

Broadly speaking, the near future looks challenging for equities. “Even though we’ve seen some pretty strong sales figures in the early part of this earnings season, the current financial environment with high inflation and interest rate increases is difficult for stocks. As I
wrote about a month ago, we could be looking at a serious repricing of stocks, where the main asset that stands to gain is commodities – even if the situation in Ukraine hopefully gets solved. So, if that isn’t part of your investment strategy yet, maybe it’s time to start considering it,” Garnry says.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
Beethovenstrasse 33
CH-8002
Zurich
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.