Funds for commodity and energy should be booming now with rising raw material prices and oil prices. However, as rice prices reaches a high, this might cause concerns for the economy. For the past month, we had witnessed rises in commodities, energy funds and also in the Brazil sector.
I had decided to lower my holdings in Brazil as it nears the high mark of 70,000 to cash in on my profits. I noticed that perhaps the high raw material prices are not justified according to demand and supply factors especially for oil. OPEC had stated many times that supply of oil is adequate and with oil traders and energy funds buying into oil, this artifically inflates the price of oil. In addition, this also applies to commodities. However, it is unsure how this stagflation plays out as people will soon realise that the demand for goods and services would fall with a gloomy economy looming.
Hence, I suggest a cut on all energy and commodities holdings as it seems to be a tad too high for now. Although there's no doubt that oil prices would keep going up in future, this surging rise in prices might be too much to take. For Brazil funds, there might be cut back at the 69000-70000 level and it is thought that the index at this level might not hold for too long with US economy weakening. For other sectors, I suggest DCA for averaging down or start buying as it seems that markets are recovering slowly.
