Strengthening Global Economy Could Lift Hard Asset ETFs

Natural resources or commodity-related ETFs can potentially help investors enhance their portfolios as the global economy continues to strengthen.

The hard asset category has just experienced a great fourth quarter and may maintain its current outlook.

"Underpinning nearly all positive commodity price performance during the quarter were improved demand fundamentals fueled by synchronized global growth among developed and emerging markets," Shawn Reynolds, Portfolio Manager for VanEck, said in a research note.

Crude oil prices have firmed on rising demand and falling global inventories as the Organization of Petroleum Exporting Countries and other non-OPEC producers comply with oil production cuts.

In the diversified metals and mining category, metals prices have also steadily risen on a combination of global demand, Chinese capacity rationalization and company financial discipline that led to more balanced markets, improved pricing and stronger equity performance.

Looking at the agricultural segment, fertilizer demand was decent with both potash and urea markets coming back into balance after what appeared to be a bottom in the third quarter.

"We exit 2017 with the strongest global economic growth forecasts since the financial crisis. With an outlook for further synchronized growth in 2018, we see tighter supply and demand balances for a vast majority of the commodities that we follow closely," Reynolds said.

As investors consider ways to diversify a portfolio, one may look to resources and commodities-related ETFs, such as the VanEck Vectors Natural Resources ETF (HAP) .

HAP is a based on an index of global commodity equities. The underlying VanEck Natural Resources Index tracks companies involved in the production and distribution of commodities and commodity-related products and services involved in agriculture, alternatives (water & alternative energy), base and industrial metals, energy, forest products, and precious metals.

The hard asset-related ETF includes a diverse portfolio of various commodities-related equity companies. For instance, sector weight include materials 39.5%, energy 28.4%, consumer staples 15.7%, industrials 10.6% and utilities 2.0%. Top component holdings include Monsanto 6.8%, Deere & Co 6.6%, Exxon Mobil 3.9%, Tyson Foods 3.1% and Archer Daniels Midland 3.0%.

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