Last year, commodities hit their lowest level since 1999, but as of mid-year 2017, they were up nearly 15% from the bottom.1 The S&P GSCI posted its first positive year in 2016 since 2012, which matters because positive years rarely show up alone. In fact, there have only been single years of positive returns for commodities three times since 1970. Also, inflows were the largest since 2009, when market participants took advantage of the 2008 crash that led to a three-year bull market.
While flows can influence price structure, they tend to be less important than fundamentals. The fundamental picture seems to be turning since most commodities that have been in substantial oversupply are looking healthier currently. Oil, the flagship of the commodities, has been in one of the largest surpluses ever, lasting over the past 2.5 years. The surplus seems to be balancing toward a deficit, bottoming out roughly at same level seen in 1999.