Data from Incrementum AG and Crescat Capital LLC show the relationship between commodities and U.S. equities, and the next commodity super-cycle might be right around the corner.
In recent years, commodity prices have reached a 50-year low relative to overall equity markets (S&P 500).
Historically, lows in the ratio of commodities to equities have corresponded with the beginning of new commodity supercycles.
As Visual Capitalist’s Bruno Venditti shows in the infographic below, using data from Incrementum AG and Crescat Capital LLC, the relationship between commodities and U.S. equities has varied greatly over the last five decades.
What is a Commodity Supercycle?
A commodity supercycle occurs when prices of commodities rise above their long-term averages for long periods of time, even decades. Once the supply has adequately grown to meet demand, the cycle enters a downswing.
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The last commodity supercycle started in 1996 and peaked in 2011, driven by raw material demand from rapid industrialization taking place in Brazil, India, Russia, and China.
The economic war against Russia has partially failed due to Europe having itself paid a high price to effect a partial boycott of Russian oil and gas.