Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Long-term Review of Stock & Commodity Bull Markets, Alternating Leadership

Stock-Markets / Investing 2009 Jun 11, 2009 - 01:14 AM GMT

By: Donald_W_Dony

Stock-Markets

Best Financial Markets Analysis ArticleOver the past 120 years, there has been a constant shifting of leadership between stocks and commodities. From 1875 to 1905, the U.S. stock market provided greater relative performance than raw materials. This changed to highlight commodities over equities from 1905 to 1920. The crown shifted back to stocks throughout the 1920s only to lose that leadership again to natural resources from 1930 to 1946. Stocks, once again, offered greater relative performance over commodities in the the late 1940s and continue to prove superior until 1965 where raw material prices took the leadership back from stocks and provided higher returns for investors until 1982.


The secular shift occurred again in the 1980s and 1990s with raw material prices remaining flat to down and the S&P 500 enjoying one of its strongest upward runs. The leadership was once more transferred back to natural resources in 2000 and commodities are now in a secular bull market whereas the paper-based S&P 500 has been pinned in a nine year bear market.

Chart 1 illustrates the leadership transfer, over the past 20 years, of the S&P 500 and the Commodity Research Bureau Index (CRB). One of the main triggers for this alternating performance is the movements of the U.S. Dollar Index. In recent times, from the mid-1960s to present, whenever the USD has been weak, it has fueled future inflationary pressures and driven the price of commodities upward. In contrast, the stability and upward movement of the big dollar in the 1980s and 1990s provided the underpinning for a disinflation environment which allowed the paper-based S&P 500 to enjoy a substantial advance from 90 to 1600.

As mounting nation debt and negative fundamentals began to weight down the American currency in 2000-2002, the tide of greater relative performance began to favour commodities over stocks. The secular bull market for stocks had ended and the next long-term run for natural resources had begun.
The correlation between the dollar on the CRB can be closely seen in Chart 2. This long-term picture outlines the affects of the currency to raw material prices.

Bottom line: Since 1875, the average transfer of bull market leadership between stocks and commodities has been about 18 years. Historical data would suggest that the current 9-year bear market of the S&P 500 is only half completed. Building inflationary pressures are also a byproduct of prolonged leadership in natural resources. During the last great commodities bull market (1965-1980) stagflation was the initial development in the early 1970s which was followed by hyperinflation and interest rates exceeding 20%.

Investment approach: The downward trending USD is steadily moving commodity prices higher. Economic demand, largely generated from Asia, is anticipated to rebuild starting in 2010. Commodities can be expected outperform stocks for another two business cycles (8-9 years). As the leadership contest between stocks and raw materials is a normal reoccurring development within the markets, investors may wish to overweight their portfolios toward commodities for the next few years to take advantage of this present secular bull market.

Suggested exchange traded funds are: PowerShares DB Commodity Index Tracking (DBC), PowerShares Agriculture (DBA), StreetTracks Gold (GLD), PowerShares DB Base Metals (DBB), iShares Comex Gold Trust (IGT), iShares S&P/TSX Materials (XMA), iShares S&P/TSX Energy (XEG), Claymore Global Mining (CMW)and Claymore Global Agriculture (COW).

More research is available in the June newsletter. Go to www.technicalspeculator.com and click on member login.

Your comments are always welcomed.

By Donald W. Dony, FCSI, MFTA
www.technicalspeculator.com

COPYRIGHT © 2009 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present.  He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.   

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms.  He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

Donald W. Dony Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules