Invesco ETFs and ETPs

Commodity investing with Invesco ETFs and ETPs

Investing in commodities comes with several potential benefits, especially during periods of inflation and supply and demand imbalances.

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Diversification

Incorporating commodities can help diversify1 a traditional investment portfolio of stocks and bonds.

Potential inflation hedge

Allocating to commodities can offer a hedge against elevated inflation.2

Attractive return potential

Given its global reach and wide usage, commodities may offer attractive return potential.

Transcript

Title: Tide has turned for US dollar

While the US dollar had an exceptional rally at the of end 2024, the tide has turned with the factors that had supported it now driving it lower. After hitting more than a two-year high in early January, the dollar is down, and we think it could go even lower because of three key factors:

1. Heightened macro uncertainty: Global tariff gyrations and mounting stagflation fears have upended market confidence in the US and we don’t see this ending in the near term.

2. Federal reserve rate cuts: The Fed still has 50 basis points of cuts penciled in for this year, and lower rates will likely reduce demand for the dollar. Plus, President Trump has been putting pressure on the Fed Chair to lower interest rates.

3. Currency strength across the globe: Some analysts believe the era of US exceptionalism is ending as countries look to reduce their reliance on the US dollar. European currencies are being propped up by major defense and infrastructure spending plans, notably in Germany, the UK, and the European Union. The outlook also seems a lot less bleak for the Japanese yen, with the Bank of Japan in a rate hiking cycle as the rest of the world’s major economies cut rates. And finally, while China is deeply intertwined in the US’s tariff games, expectations for supportive stimulus can serve as a buffer.

For investors looking to play into the above-mentioned themes and gain foreign currency exposure, consider UDN, FXE, or FXY.

UDN seeks to replicate the performance of shorting the US dollar against a basket of the six major world currencies, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. FXE and FXY seek to track the spot rate between the euro and Japanese yen, respectively, versus the US dollar, and hold physical currency deposits. They offer a more targeted currency exposure, compared to UDN.

Learn more about these funds below this video.

Important Information

Not a Deposit | Not FDIC Insured | Not Guaranteed by the Bank | May Lose Value | Not Insured by any Federal Government Agency

All data from Bloomberg as of April 2025 unless otherwise stated.

Invesco Distributors, Inc.    04/25         NA 4430718

US Dollar's Momentum Reverses

Following its two-year high in January, the dollar has begun to decline, influenced by increased macro uncertainty, Federal Reserve rate cuts, and the strengthening of global currencies. These factors suggest potential weakness for the dollar. Invesco offers solutions that can help hedge against currency fluctuations, inflation, and market uncertainty.

Commodity ETFs and ETPs line-up

Ticker Fund name Total expense ratio Net expense ratio How to invest
PDBC Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF 0.67% 0.59%* Invest in PDBC
Fact sheet
PDBA Invesco Agriculture Commodity Strategy No K-1 ETF 0.74% 0.59%* Invest in PDBA
Fact sheet
EVMT Invesco Electric Vehicle Metals Commodity Strategy No K-1 ETF 0.73% 0.59%* Invest in EVMT
Fact sheet
DBC Invesco DB Commodity Index Tracking Fund 0.87% 0.87% Invest in DBC
Fact sheet
DBA Invesco DB Agriculture Fund 0.92% 0.92% Invest in DBA
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DBB Invesco DB Base Metals Fund 0.79% 0.79% Invest in DBB
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DBE Invesco DB Energy Fund 0.77% 0.77% Invest in DBE
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DBO Invesco DB Oil Fund 0.76% 0.76% Invest in DBO
Fact sheet
DBP Invesco DB Precious Metals Fund 0.76% 0.76% Invest in DBP
Fact sheet

The Adviser has contractually agreed to waive fees and/or pay certain Fund expenses through at least Aug. 31, 2025.

Frequently asked questions

Commodities can be attractive for investors seeking diversification,1 an inflation hedge,2 or simply attractive return potential.

  • Diversification: Historically, commodity returns have had a low correlation to equities and a negative correlation to fixed income, which may help improve the risk-adjusted returns of a diversified portfolio.3

  • Inflation Hedge: Although inflation has been easing year-over-year, the US Consumer Price Index (CPI) remains stubbornly above the US Federal Reserve’s (Fed) 2% target. Commodities have historically been the most efficient hedge for inflation and have returned positively 72% of the time when CPI was above 2%.4

  • Attractive return potential: Investing in commodities can help investors benefit from inflation and supply/demand imbalances when the prices of oil, agriculture, and other natural resources rise. We may currently be in the early innings of a strong multi-year, structural commodity bull cycle that is being driven by heightened geopolitical tensions, rising energy costs, renewed focus on climate initiatives, and climate change, in our view.

In addition to the benefits of commodities in general, investing through ETFs can also provide increased benefits like convenience, ease of access, and transparency.

  • Convenience: While some commodity ETFs and ETPs do hold physical commodities, most are futures- and derivatives-based, allowing investors to participate in the returns without having to worry about taking physical delivery of the commodity. The futures contracts are replaced by a later-dated contract prior to expiry in a process known as "rolling" futures contracts.
  • Ease of Access: Like stocks, commodity ETFs and ETPs can be traded on a stock exchange anytime during market hours. This aspect can offer greater flexibility when compared to mutual funds.
  • Transparency: ETFs and ETPs may provide increased transparency into their portfolio holdings compared to mutual funds. Most ETFs publicly disclose their holdings daily.

Some of the most heavily traded global commodities include Brent crude oil, West Texas Intermediate (WTI) crude oil, natural gas, gold, silver, copper, and agricultural commodities, such as corn and sugar. While the broader universe is significantly more expansive, the DBIQ Optimum Yield Diversified Commodity Index Excess Return provides exposure to 14 of the most widely traded commodities in the world.

The commodities landscape is comprised of four primary sub-sectors: Agriculture, energy, industrial metals, and precious metals.

  • Energy: Gasoline, WTI crude oil, Brent crude oil, NY Harbor Ultra Low Sulfur Diesel (ULSD)
  • Precious metals: Gold, Silver
  • Industrial metals: Copper, Zinc, Aluminum
  • Agriculture: Sugar, Soybeans, Corn, Wheat

As measured by inflation beta5 from 1998 to 2022, commodities are historically the most efficient hedge for inflation of any major asset class, even when compared to common inflation-fighting instruments, like Treasury Inflation-Protected Securities (TIPS),6 real estate investments trusts (REITs),7 and gold.8 This is because commodities are raw materials used as inputs in housing, transportation, and food, all components of the CPI. In addition, inflation shocks are usually the byproduct of stronger-than-expected demand and/or supply uncertainty, all of which may boost the price of goods.

  • Futures contracts trade on exchanges, representing an agreement between the buyer and seller whereby the price is fixed, and the buyer agrees to take delivery of the underlying asset at a specified date in the future. Futures-based commodity ETFs and ETPs use derivatives, including futures and swaps, to deliver commodity exposure.
  • In the commodity arena, spot prices typically don’t match futures prices, creating situations of backwardation and contango. Spot prices are the current costs for a particular commodity for immediate delivery, while futures prices reflect delivery of the commodity at a particular future date. Backwardation occurs when the spot price of a commodity is higher than futures prices, signaling an expected shortage of supplies; consumers are willing to pay more to receive the product now in preparation for the shortage. On the flip side, contango describes the scenario in which a commodity’s futures contracts are priced higher than what’s seen in the spot market, signaling an expected surplus; consumers aren’t willing to pay more right now, given the abundance of supplies.
  • Most of the first commodities ETFs and ETPs that were launched invest in the front-month contract. Given commodities are physical assets, to avoid physical delivery, funds will have to frequently sell out of expiring contracts and move to the following futures contract. During contango markets, this repeated buying and selling of positions can expose funds to high roll costs, considering they would have to sell a less expensive, expiring contract and buy a more expensive, later-dated contract.

The optimum yield methodology is a key feature of Invesco’s commodity suite. This approach seeks to maximize the roll yield during backwardation markets and minimize roll costs during contango markets, reducing the burden for investors to monitor and understand changing futures curve shapes. During backwardation markets, rolling further out the curve can potentially allow the funds to realize roll yield as the contracts appreciate as they move toward expiry.

Given the global reach of commodities, commodity prices have many drivers. However, some of the key influencing factors include:

  • Global Economic Health: The health of the global economy can directly impact the supply and demand of commodities, influencing prices. In particular, developments in China and the US often have an outsized influence since they are the world’s two largest global economies by gross domestic product (GDP), which measures the total value of a country's finished goods and services.

  • Green Transition and Climate Volatility: Contrary to popular belief, the Energy Transition/Decarbonization trend is supportive of commodity prices given metals, like copper, aluminum, zinc, and nickel, play a significant role in the world’s path to net zero, yet efforts to reduce carbon emissions are significantly constraining supplies. This combination of growing demand and tightening supply could potentially create sustained global deficits in the metals sector for years — possibly decades — to come.

    The growing application of environmental, social, and governance (ESG) and (greenification) investment solutions has also led to significant underinvestment in fossil fuels, such as oil and gas, stunting supply growth while global demand continues to climb. Extreme weather events may continue to upend supplies in the agricultural sector. Furthermore, there may be increased demand for agricultural commodities to be used as “energy crops” for ethanol and biodiesel.

  • Geopolitics: Rising geopolitical tension, especially between significant players in this market, can lead to heightened uncertainty and volatility for prices, as we saw play out following Russia’s invasion of Ukraine. Tensions between the US and China have also been rising, which could potentially rewrite existing global trade routes.

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    Commodity Digest: Monthly Market Insights

    Explore the latest trends in energy, metals, and agriculture—driven by geopolitics, global policies, and supply-demand fundamentals. This monthly digest delivers strategic insights, and ETF highlights to help investors navigate commodity markets.

Discover more from Invesco

  • 1

    Diversification does not guarantee a profit or eliminate the risk of loss.
  • 2

    Sources: Invesco and Bloomberg L.P., as of 12/31/21. Based on our analysis of the historical inflation betas (using data from 1998-2021) of commodities, REITs, large-cap value equities, large-cap blend equities, gold, TIPS, and bonds. Commodities had the highest inflation beta, making it historically the most efficient inflation hedge among the group. Large-cap value equities were higher than large-cap blend equities, making it historically a more efficient inflation hedge versus large-cap blend equities. Inflation beta is a metric used to evaluate an asset class's ability to hedge inflation. It measures the change in inflation against the return of the asset class over a specific time period (i.e., it describes the return of an asset class given a 1% increase in inflation.) The analysis is based on specific indexes used as proxies, which are as follows: Commodity — DBIQ OY Commodity Index (12.26), Commodity — BCOM Index (8.97), REITS — FTSE NAREIT All Equity REITS Index (5.79), Large-cap Value Equities — S&P 500 Pure Value Index (5.11), Large-cap Blend Equities — S&P 500 Index (2.91), Gold — XAU (2.88), TIPS — Bloomberg US Treasury Inflation-Linked Bond Index (1.58), and Bonds — Bloomberg Intermediate US Government/Credit Bond Index (-0.37). DBIQ OY Commodity Index — The DBIQ Optimum Yield Diversified Commodity Index is a rule-based index composed of futures contracts of the 14 most heavily traded and important global commodities. BCOM Index — The Bloomberg Commodity Index (BCOM) tracks the performance of a diversified basket of global commodities. REITs (as measured by FTSE NAREIT All Equity REITs Index) stands for Real Estate Investment Trusts, which are companies that own and/or operate income-producing real estate. The index is an unmanaged index considered representative of US REITs. The S&P 500 Pure Value index is a style-concentrated index designed to track the performance of stocks that exhibit the strongest value characteristics by using a style-attractiveness-weighting scheme. The S&P 500 Index is a market-capitalization-weighted index (the largest companies based on market capitalization make up the largest portion of the index) consisting of the 500 largest, most prominent publicly traded companies in the US as determined by S&P. XAU — Gold spot price quoted in US Dollars. TIPS (as measured by Bloomberg US Treasury Inflation-Linked Bond Index) stands for Treasury Inflation-Protected Securities, which are Treasury bonds indexed to inflation to protect investors against a decline in purchasing power. The index measures the performance of the US TIPS market. Bloomberg Intermediate US Government/Credit Bond Index is a broad-based benchmark that measures the non-securitized component of the US Aggregate Index with less than 10 years to maturity. The index is comprised of the Intermediate US Treasury and US agency indices.
  • 3

    Source: Bloomberg, L.P., as of 3/31/23. Correlation time period 12/31/1997 to 3/31/2023. Commodities are represented by the S&P GSCI Index Total Return. Stocks are represented by the S&P 500 Total Return Index. Bonds are represented by the Bloomberg US Treasury Bond Index. A correlation is any statistical relationship, whether causal or not, between two random variables or bivariate data. An investment cannot be made directly into an index.
  • 4

    Source: Bloomberg L.P., Jan 1998 - Dec 2024. CPI is represented by the CPI YOY Index, and commodities are represented by the S&P GSCI Index. The analysis is based on the year-over-year CPI and monthly rolling year-over-year commodity returns.
  • 5

    Inflation beta is a metric used to evaluate an asset class’s ability to hedge inflation. It measures the change in inflation against the return of the asset class over a specific time period.
  • 6

    The value of inflation-linked securities will fluctuate in response to changes in real interest rates, generally decreasing when real interest rates rise and increasing when real interest rates fall. Interest payments on such securities generally vary up or down along with the rate of inflation. Real interest rates represent nominal (or stated) interest rates reduced by the expected impact of inflation.
  • 7

    REITs are pooled investment vehicles that trade like stocks and invest substantially all their assets in real estate and may qualify for special tax considerations. REITs are subject to risks inherent in the direct ownership of real estate. A company’s failure to qualify as a REIT under federal tax law may have adverse consequences for the REIT’s shareholders. REITs may have expenses, including advisory and administration, and REIT shareholders will incur a proportionate share of the underlying expenses.
  • 8

    Sources: Bloomberg L.P. and US Bureau of Labor Statistics, as of December 2024