The graph below shows the S&P 500 Index (—Stocks) and the S&P Goldman Sachs Commodities Index Total Return (—Commodities) for the past 10+ years. Over several decades (since the 1970s) these two indices have had an interesting if not mesmerizing relationship (see graph at bottom).
At the end of 2017, with the Commodities / Stocks ratio (shown below) below the value of 1.0, it may well have been Commodities’ time to shine again (at least compared to Stocks).
The graph below comes from a presentation given by Jeffrey Gundlach of DoubleLine in December 2017. Gundlach believed at that time that we were in – or were approaching – a period when Commodities would outperform Stocks. The graphs above and below show the ratio of an index of Commodity prices divided by an index of Stocks prices. Taken together, the graphs suggest the magnitude (significant) and the timing (immediate) of the idea. Not surprisingly Gundlach called this his best investment idea for 2018. We have decided to keep an eye on the situation, and the two graphs above will be updated frequently.
Note: We’re not making an outright investment call here; we are simply keeping an eye on Gundlach’s call. If you wish to discuss the above material, give us a call at 610.788.2142.
CUBIC Advisors, LLC has no affiliation with DoubleLine Funds.