Stocks and commodities are more likely to go separate ways than to move together, according to Binky Chadha, Deutsche Bank AG’s chief global strategist.
As the CHART OF THE DAY illustrates, the Standard & Poor’s/GSCI Index of commodity prices was little changed from the end of 2011 through yesterday. During the same period, the S&P 500 climbed as much as 24 percent and approached a record set in October 2007.
Even though they rose with equities yesterday, commodities have failed to keep up because of a rising dollar and “global slack” in the economy, Chadha wrote two days ago in a report. There will be more weakness to come because commodities are still overvalued, the New York-based strategist wrote.
The Dollar Index, based on the currency’s value against those of six major U.S. trading partners, was 14 percent higher as of yesterday than its April 2011 low. The increase made oil, gold and other commodities priced in dollars more expensive for international buyers.
Slack refers to idle factories, unemployed workers and other signs of a production slump. U.S. plants have operated at less than 80 percent of capacity since April 2008, according to data compiled by the Federal Reserve. The unemployment rate, as tracked by the Labor Department, has exceeded 7.5 percent since January 2009.
Yesterday, the S&P/GSCI index of 24 commodities advanced
0.9 percent to 648.70. Higher prices for copper, oil and farm products contributed to the gain. The S&P 500 rose 0.7 percent to 1,558.71 after falling for three straight days, its longest losing streak this year.