Tags: stocks | commodities | economy | prices

Stocks, Commodities Fall Out of Lockstep

By    |   Wednesday, 03 April 2013 08:16 AM

Stocks and commodities have moved in a correlated manner for the past five years, but now they’re on diverging paths.

While stocks are soaring to record highs, commodities are lagging behind, The Wall Street Journal reports. The Standard & Poor’s 500 Index jumped 10 percent in the first quarter, but the Dow Jones-UBS Commodity Index fell 1.1 percent during that period.

Experts disagree about whether the commodity price weakness carries any negative implications for the global economy, according to The Journal.

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

Some say it’s just a matter of excess supply, rather than slumping demand. Commodity production ramped up starting in the last decade amid high prices and is now creating a price cushion, they say.

In addition, low inflation makes commodities an unappealing investment, the thinking goes.

"The weakness in commodities prices isn't a statement on global economic activity," Mark Luschini, chief investment strategist at Janney Montgomery Scott, tells The Journal. "It's a situation where supply caught up with demand. It's not necessarily a worrying sign."

But others see it differently. Commodities "are an important indicator for us," Doug Noland, manager of the Federated Investors Prudent Bear Fund, tells The Journal.

"It's an indication that there are structural problems [in the economy] that are being ignored."

When it comes to crude oil, many experts anticipate prices will fall as U.S. production continues to expand.

"A dramatic expansion of U.S. production could push global spare capacity to exceed 8 million barrels per day, at which point [Organization of Petroleum Exporting Countries] could lose price control and crude oil prices would drop, possibly sharply," according to a report from the National Intelligence Council, CNBC reports.

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

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Stocks and commodities have moved in a correlated manner for the past five years, but now they’re on diverging paths.
stocks,commodities,economy,prices
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2013-16-03
Wednesday, 03 April 2013 08:16 AM
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