iShares S&P GSCI Commodity-Indexed Trust

GSG

Market cap $977M

U.S. stocks continued their momentum with a solid +2.30% return, while world stocks pulled back -1.12% after their strong June performance. The commodity surge pushed this asset class to +4.73% year-to-date, representing a remarkable turnaround from the challenging April decline.

The commodities composite rose 12.50% in 2024, driven by a 58.14% gain in soft commodities, despite a strong dollar and higher interest rates. iShares S&P GSCI Commodity-Indexed Trust ETF, a diversified commodity ETF with significant energy exposure, increased 8.52% in 2024, outperforming the energy sector but underperforming the broader commodity composite. The case for higher commodity prices in 2025 includes persistent inflation, a growing global population, and a potential economic rebound in China, despite risks like a strong dollar and geopolitical turmoil.

GSG's high liquidity and broad commodity access make it a solid portfolio diversifier, but energy sector risks warrant caution. Positive catalysts include bullish natural gas fundamentals, gold's inflation hedge potential, and the $500 billion Stargate AI infrastructure initiative driving demand for industrial metals. Livestock sector weight increases, supported by tight cattle supplies and strong consumer demand, further bolster GSG's diversified commodity exposure.

In this article, we assess the potential for commodities to outperform amid growing anticipation that the Federal Reserve (Fed) will begin to unwind monetary policy in September. We argue that commodities as a whole have never been this cheap compared to equities since the 1970s, and that we could be entering into a new commodity supercycle. For investors looking to build a more selective and concentrated exposure to commodities, we warn that this could be a risky endeavour. However, being selective is absolutely critical for alpha.

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Commodities are showing signs of life as inflation picks up, making them attractive for investors looking for inflation plays. iShares S&P GSCI Commodity-Indexed Trust is an ETF that offers exposure to a broad range of commodities and can be a valuable addition to a diversified portfolio. GSG has a heavy allocation to energy commodities, which could make it sensitive to changes in energy prices, and it has underperformed other similar commodity funds.

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