The upgrade for commodities means that we now have overweight positions in all ‘risky’ asset classes in our TAA, with the highest conviction on equities followed by smaller positions in real estate, spread products and commodities. 

## Commodity sector performance in 2014


## Pick-up in global demand growth supports commodities

The positive mood on the global financial markets was affected a bit in the past two weeks, which caused some form of consolidation after the strong upward trend in May and early June. Commodities were the only asset class with strong positive returns.

One of the reasons for the performance improvement in commodities is the increased visibility on stronger global demand growth in recent weeks. The Global PMI rose sharply in May, with nice gains for the new orders sub-index of the Composite PMI and the new orders-to-inventory component in manufacturing. 

Encouraging was also that the Composite PMI for emerging markets (EM) finally rose again, after sliding for many months. This suggests that EM growth momentum might be close to the bottom. If this is indeed the case, the most important driver would be an improvement in EM export momentum on the back of better growth in developed markets. This development is already foreshadowed by the moderate rise in the export orders component of the PMI Manufacturing in EM.