Commodities rise 12% in July, outperforming S&P 500 and Nasdaq-100

Commodities emerged as the top-performing asset class in July, surging 12% as geopolitical tensions in the Persian Gulf escalated and oil prices soared. The iShares S&P GSCI Commodity-Indexed Trust, which tracks commodity performance, reflected this spike, driven largely by a rebound in crude oil prices after a significant sell-off in June. Brent crude, the global benchmark, rose from $73 to $90 per barrel in July, a 23% increase, as market reactions fluctuated with ongoing conflict in the region.

The recent surge in commodity prices comes amid unstable conditions in the oil market. Since the U.S. and Israel initiated conflict with Iran in February, oil prices have experienced dramatic swings. Investors are wary as a ceasefire remains uncertain, making predictions about future oil prices speculative at best. Meanwhile, the S&P 500 index remained flat in July, and the tech-heavy Nasdaq-100 fell by 6.6%, suggesting that commodities are currently an attractive alternative for investors seeking growth.

In contrast, U.S. real estate investment trusts (REITs) also demonstrated positive performance, climbing 2.6% in July and showing a year-to-date increase of 14%, outperforming the S&P 500. The recovery in the real estate sector follows a tough period during the COVID-19 pandemic, where many REITs struggled due to shifts in work culture and spending habits. The stabilization of these trends, along with unchanged interest rates, has contributed to this recovery.

Certain categories within the REIT sector are pulling the entire industry upward. Lodging and resort REITs surged nearly 43% in the first half of the year, driven by a rebound in corporate travel. Similarly, data center REITs grew over 33% due to heightened demand from tech companies, particularly those in artificial intelligence. As workers return to offices and retail activity picks up, investors may find REITs to be a more stable investment option compared to the volatile commodity market.