The raw material markets posted a loss in the fourth quarter of 2018 as the prices of many commodities moved lower throughout the quarter. A stronger U.S. dollar, rising U.S. interest rates, concerns over international trade and the global economy, and risk-off behavior because of losses in the U.S. stock market impacted the overall performance. The commodity asset class consisting of 29 of the primary commodities that trade on U.S and U.K. exchanges moved 2.85% lower for the final quarter of 2018 that ended on December 31. In 2018 the asset class lost 6.82% of its value.
Commodities were up 7.95% in 2017 following on the heels of 13.41% appreciation in 2016. The overall winner of the 29 for the quarter was cocoa futures that posted a gain of 17.46% for the three-month period with ICE sugar in second place with a 15.45% gain. The most significant move to the downside came in NYMEX crude oil futures market which fell 38.01% and gasoline futures which dropped by 37.57% during the offseason.
The other double-digit percentage gainer in Q4 was palladium. There were more double-digit losers than winners in Q4 including Brent crude oil, heating oil, the Baltic Dry Index, nickel and Frozen Concentrated Orange Juice futures.
The U.S. dollar is a significant factor when it comes to commodity prices as it tends to have an inverse value relationship with raw material prices. The dollar index posted a 1.05% gain over the quarter and was 4.26% higher for the year after falling by 10.23% in 2017. The dollar found support from a widening interest rate gap with the euro and other currencies as a more hawkish Fed picked the pace of rate hikes while the ECB and BOJ left short-term rates in negative territory.
The Fed hiked rates by 25 basis