The well diversified Bloomberg Commodity Excess Return Index rose 1.4% in May, the smallest monthly gain of the year. Commodity sectors, though were much higher. And 28.1% was the highest ever Jan-May return in the history of the index going back to 1991.
There is another contradiction, not shown here, that corporate profits, usually booming in time of inflation, may be pressured due to the odd Covid driven nature of the price pressures-mainly supply and labor bottlenecks. That is for another post.
So much for the past. What does the mixed message tell us, if anything about the future? If anything, we can look to the predicate causes - Covid and war - showing their effects. This may not be an economic problem, or much less of a problem if these causes go away. Will oil go to all time highs? Will food prices continue rising? Maybe, on both accounts, if the war gets much hotter and if pandemic (Covid AND monkeypox) spreads.
In the alternate case, if either one or both - war and virus - cools off or goes away, commods can return to their deflationary equilibrium.
Why the Bloomberg Commodity Index? Because it is a DIVERSIFIED index, not an essentially energy index like the S&P GSCI. Why the "Excess Return" version of the index? Because it is a pure futures price index unlike the "Total Return" headline index which distorts commodity price returns by inexplicably including TBill interest earned on collateral. This is bloomberg.com index data. My excel spreadsheet is available upon request.
Disclaimer: Posts are for education only, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors. Send request to gdrahal@outlook.com to follow this blog and for additional information.
© 2022 George Rahal
No comments:
Post a Comment
Please feel free to comment!