Commodities outlook

Commodities have substance in a bimodal world

The long-term case for commodity investment will be affected by dichotomous anxieties about deflation and inflation, but can be alleviated by trading momentum.
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Agricultural commodities such as soy are expected to fall during 2012
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<div style="text-align: left;"> Agricultural commodities such as soy are expected to fall during 2012 </div>

In an investment landscape more uncertain than usual, asset allocators and fund managers have a tough year ahead. Any outlook for conventional financial instruments stocks and bonds needs to be predicated on a view of the world that has, in the words of bond market sage Bill Gross, managing director of Pimco, shifted from the “new normal” to the “paranormal”.

“A new duality credit and zero-bound interest rate risk characterises the financial markets of 2012, offering the fat left-tailed possibility of unforeseen policy delevering or the fat right-tailed possibility of central bank inflationary expansion,” wrote Gross in a letter to his investors last week. Gone is a world of muted...

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