It’s Official, Commodities are in a Depression

Via Bespoke:



The chart is pretty self explanatory, but nonetheless stunning. It hasn’t been this bad for commodities since the post-dotcom crash recession, and in many ways it’s much worse than it was in 2002.

A few takeaways from the current commodities debacle:

  • We are 4 years into a brutal bear market for most commodities
  • Thus far, commodities have not proven to be a ‘leading indicator’ for other asset classes such as equities – we will see how long this remains the case
  • The commodity downturn has taken place largely in direct contradiction to the wishes of most major global central banks who have remained committed to generating a steady and stable level of inflation (2%-2.5% in the US)
  • One has to wonder if the generally dangerously low level of price inflation will keep the Fed on hold even longer as a premature rate hike could sink a dis-inflationary economy into outright deflation

The last time commodities looked this bad the Fed was in the midst of an easing cycle, this time really is different…