Bloomberg Commodity Index hits 13-year high as rally spreads beyond oil

A sweeping rally across energy, metals, and agricultural markets has pushed the Bloomberg Commodity Index to its highest level since 2012, while the Quantix Commodity Index has reached an all-time record. Bloomberg macro strategist Simon White warned Wednesday that the surge threatens to squeeze corporate profit margins, dampen household spending, and weigh on U.S. equity valuations.moomoo+2

A Rally That Extends Far Beyond Oil

The commodity advance, which has accelerated since early August, is no longer principally an oil story. European natural gas prices have climbed 34% since the start of August, while gasoline has risen 22%. Base metals including zinc and copper, precious metals such as silver, platinum, and gold, and soft commodities like sugar, cocoa, and corn have all posted gains. Only a handful of major futures-traded commodities — including hogs, cattle, nickel, and orange juice — have declined over that period.ua+2

The rally has been driven by a convergence of supply-side pressures. The war in Iran has hobbled refining capacity, pushing up diesel and gasoline prices and inflaming transportation costs. Escalation of the Russia-Ukraine conflict, particularly in the Black Sea region, along with concerns over a strong El Niño event, have added upward pressure on agricultural commodities. Former Goldman Sachs The Goldman Sachs Group, Inc. ↘ 1.38% commodities head Jeff Currie had warned this summer of growing scarcity in the physical economy, and those warnings have been borne out.moomoo+3

MUFG Research confirmed the trend in a September 9 note, observing that higher energy prices have lifted the Bloomberg commodity price index to its highest level since 2012, helping explain the outperformance of commodity-linked currencies such as the Australian dollar, Norwegian krone, and Canadian dollar.mufgresearch

The Equity Market Risk

White's note struck a cautionary tone for stock market investors. On a 10-year annualized basis, Bloomberg Commodity Index returns have reached a level exceeded only once — in 2008 — since the commodity supercycle of the 1970s. Historically, elevated commodity prices have coincided with weaker equity performance, as seen in the 1970s and early 2010s, while stocks have tended to deliver their strongest returns when commodities were cheap.moomoo+2

"The current environment of rising stock and commodity returns looks somewhat of an anomaly," White wrote. "If commodity prices stay bid — and there are many reasons for them to do just that — the equity market has more downside ahead."oilprice

The ratio of the Nasdaq 100 to the Quantix Commodity Total Return Index has also shifted, reflecting traders repricing scarcity in the physical world. Copper has reached an all-time high above $14,700 per ton, while iron ore prices in Singapore have settled around $100 per ton.ua+2