WATCH: A Molotov in the macros

One of the best-performing categories since the beginning of 2021 has been commodities. Everything from oil to wheat to palladium to gold is up, due in large part to inflation worries.

But how much room is there left to run? And how big a portion should commodities make up of a portfolio? Global commodity crises tend to cause severe economic damage and political upheaval. The oil shocks of the 1970s left Western economies with runaway inflation and deep recessions.

Oil revenues also helped prop up the Soviet Union and fuelled the export of Saudi extremism. Soaring grain prices in 2010 and 2011 were a trigger for the street protests that led to the Arab spring and the toppling of dictators.

Today, Russia’s invasion of Ukraine is unleashing the biggest commodity shock since 1973, and one of the worst disruptions to wheat supplies since the developed countries war. Although commodity exchanges are already in chaos, ordinary folk have yet to feel the full effects of rising petrol bills, empty stomachs and political instability.

But make no mistake, those things are coming — and dramatically so, if sanctions on Russia tighten further and if Vladimir Putin retaliates. Western governments need to respond to the commodity threat as determinedly as to Putin’s aggression.

How long will the commodities boom last? Ahead of next week’s monetary policy committee meeting, Business Day TV spoke to Mamello Matikinca, chief economist at FNB; Kevin Lings, Stanlib chief economist; and Old Mutual Wealth investment strategist Izak Odendaal.