Each quarter, we share videos on investment topics to help you better understand how we manage portfolios. This quarter, we start with an update on recent portfolio allocation moves, then discuss the supply and demand dynamics behind commodity prices.
The Investment Committee recently approved a small allocation increase to commodities which was offset primarily with a reduction in the allocation to U.S. small-cap stocks. We feel that the inflation that U.S. consumers have been experiencing lately is part of a larger trend which will keep commodity prices elevated long-term.
The inflationary trend in commodity prices is a product of the supply and demand mismatch that is indicative of commodity super cycles. You may recognize this visual from a previous video, where we discussed how commodities tend to go through multi-decade cycles where demand can change quickly, but supply is slow to react, thereby leading to extended periods of elevated or depressed commodity prices.
As of 2026, we are firmly in a situation where strong demand and short supply of many commodities is pushing prices higher.
The demand and supply forces influencing the commodity super cycle often have the opposite effect on stocks and bonds. Global events that cause economic uncertainty often push stock prices down but push commodity prices up. Periods of inflation that typically push commodity prices up often lead to higher interest rates, which push bond prices down. So, when the commodity super cycle is on the upswing, as it is now, commodities can provide portfolio diversification not achieved by stocks and bonds alone.
Since there are numerous types of commodities, each with its own demand and supply characteristics, Boulay portfolios currently use a combination of investment funds to capture our desired exposure to commodities. That includes gold-only funds backed by physical gold, an agricultural fund that rotates between typical U.S. cash crops and those grown in the tropics, as well as a go-anywhere commodity fund that holds numerous commodities with the aim to capture price appreciation while hedging against big price swings.
If you have questions about the commodity funds we use or any funds in your portfolio, reach out to your Boulay Wealth advisor.
If you are not a Boulay Wealth client but wish to learn more, check out the Wealth Management section on our website or contact us using the button below.
Investment Advisory Services offered through Boulay Financial Advisors, LLC a SEC Registered Investment Advisor.
This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein. This is meant to be a reference/guide, individual circumstances can influence outcome, verify planning with accounting and financial professionals.
This information provided has been derived from sources believed to be reliable but is not guaranteed as to accuracy and does not purport to be complete analysis of the material discussed, nor does it constitute an offer or a solicitation of any offer to buy any securities, products or services mentioned. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Consult your financial professional before making any investment decision.
Indices are unmanaged and do not incur fees, one cannot directly invest in an index. Past performance does not guarantee future results. These opinions are based on our own observations and third-party research and are not intended to predict or depict performance of any investment. These views are as of the open of business on May 15, 2026, and are subject to change based on subsequent developments. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. These views should not be construed as a recommendation to buy or sell any securities. Diversification cannot guarantee a profit or protect against a loss. All investing involves risk, including the possible loss of principal. Indices are unmanaged and do not incur fees, one cannot directly invest in an index.