In a year of bad news for global investors, investments linked to fundamental drivers of inflation – soaring prices for oil and natural resources – have enjoyed strong returns in 2022 according to new insight. In fact, indexes covering “upstream, “midstream” and downstream” aspects of energy production have all done well this year amid a global market downtown.
Beginning “upstream,” the Morningstar Global Upstream Natural Resources Index, measuring companies involved earlier in the energy supply chain such as the extraction of oil, as well as resources like metals, timber, and agricultural commodities, has risen more than 13% year-to-date. The Morningstar Global Oil and Gas Refining and Marketing Index, which is comprised of companies involved in “downstream” activities in the energy space where raw materials are delivered to the end consumer, is up nearly 17% this year. And the Morningstar MLP Composite Index, which tracks master limited partnerships involved in “midstream” energy activities such as transportation, storage and processing, has risen an eye-popping 34.5% in 2022.
Dan Lefkovitz – Index Strategist, Morningstar
“Investors may consider looking at energy and commodities as a portfolio diversifier, particularly in inflationary markets, yet these asset classes may be neglected after years of technology stock dominance. Even after a rebound in 2021, the energy sector still only represented 3.5% of the Morningstar Global Markets Index, coming into 2022, down from 11% in 2011. So, investors holding a market portfolio have little exposure. Meanwhile, according to Morningstar Direct Asset Flows, commodities-focused funds and ETFs hold just $342 billion in investor assets globally, compared with $24 trillion in equities funds and $10.4 trillion in fixed income.”
To speak with Dan Lefkovitz, reach out to Tim Benedict at firstname.lastname@example.org or (203) 339-1912.
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