Commodities v. Stocks

Equities continue to outperform commodities. During the last decade commodities have not only lagged stocks but have absolute declines in many prices. The chart highlights the Global Price Index of All Commodities (orange), a much more broadly diversified index than most. It is currently weighted 59% in non-fuel and 41% in fuel related commodities.

The blue line is the ratio of the S&P 500 to the Global Price Index. This ratio was 31.9 at the end of Q2 this year compared with a ratio of 6.6 in Q3 2011. In other words, the S&P is up nearly 5X versus the commodities index.

The Fed and other central banks are boosting money supplies and governments are pushing fiscal measures. While the global economy appears to be rebounding from Q2 lows, will all of this stimulus finally put pressure on commodities prices beyond what we have seen in gold and silver this year? More to ponder.