The Dow Jones, S&P 500 and Nasdaq closed at record highs on Friday despite signs that US jobs growth is slowing down and that expansion of the world’s largest economy remains stuck around the 1% level.
In contrast the S&P GSCI All Commodities index is flat so far in 2017 although prices for energy, metals and agriculture have rallied 34% from lows hit in January last year.
Apart from all things gold, Incrementum’s 11th annual In Gold We Trust report also features broader takes on the environment for raw materials and argues that in a historical context “the relative valuation of commodities to equities seems extremely low”:
In relation to the S&P500, the GSCI commodity index is currently trading at the lowest level in 50 years. Also, the ratio sits significantly below the long-term median of 4.1. Following the notion of mean reversion, we should be seeing attractive investment opportunities.
Cocoa . Any comments?
Something is weird about this current commodity low. There is still quite a bit of oversupply in many commodity markets which makes me think we could see another year or two of bottoming before the true bottom is in across the board which would coincide nicely with a top in the S&P 500 around middle of 2018. The top might not be in till 2019 because the yield curve probably won’t go negative this year, and the market doesn’t top out until a year after the last rate hike. Let’s assume the last rate hike is Dec. 2017. Then markets could top out mid 2018 or mid 2019 at the latest. The CRB is rolling over looking for a new all time low.