Commodities to Equity Ratio Remains at 50 Year Low: For How Long? That ratio of commodities prices compared to stocks has been at an all-time low for the past few years. However, as the chart shows, major unexpected events in the past have triggered a reversal of the commodities to equity ratio. EquiCapita points out that the 50-year average for this ratio is around 1.1 times. During the 1970s commodity bull market the ratio peaked at over 3 times. The ratio is currently at a 50-year low of around 0.2 times, almost the same as the low reached around the 2000 tech bust. Will the ratio change soon? No one can say for sure.
On the other hand, the economy is slowing, and the major stock indexes are at an all-time high. We believe much too high. We should point out that while the major indexes have reached new highs, more stocks in the Nasdaq and NYSE have been declining than going up. Our opinion given these circumstances is that record-breaking stock prices can’t be sustained, and are certainly vulnerable to unforeseen events. So what else can we say about this ratio? Although it is not a market-timing tool, it is worth watching.
Originally Posted on November 27, 2019 – Commodities to Equity Ratio Remains at 50 Year Low: For How Long?
Disclosure: Lamensdorf Market Timing Report
Lamensdorf Market Timing Report is a publication intended to give analytical research to the investment community. Lamensdorf Market Timing Report is not rendering investment advice based on investment portfolios and is not registered as an investment advisor in any jurisdiction. Information included in this report is derived from many sources believed to be reliable but no representation is made that it is accurate or complete, or that errors, if discovered, will be corrected. The authors of this report have not audited the financial statements of the companies discussed and do not represent that they are serving as independent public accountants with respect to them. They have not audited the statements and therefore do not express an opinion on them. The authors have also not conducted a thorough review of the financial statements as defined by standards established by the AICPA.
This report is not intended, and shall not constitute, and nothing herein should be construed as, an offer to sell or a solicitation of an offer to buy any securities referred to in this report, or a “buy” or “sell” recommendation. Rather, this research is intended to identify issues portfolio managers should be aware of for them to assess their own opinion of positive or negative potential. The LMTR newsletter is NOT affiliated with any ETF’s.
Active Alts is affiliated with Lamensdorf Market Timing Report. While LMTR uses charts from SentimenTrader, they do not have a financial arrangement with SentimenTrader. Past performance is not indicative of future results.
Disclosure: Interactive Brokers
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Lamensdorf Market Timing Report and is being posted with its permission. The views expressed in this material are solely those of the author and/or Lamensdorf Market Timing Report and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Disclosure: Futures Trading
Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.