Beyond oil: Commodities on the move

  • Commodity indexes kept pace with stocks in 2021
  • Oil rally fueled much of the bullishness early in the year
  • Grains, coffee, and lumber also staged sizable rallies

Despite recent volatility, 2021 is still on track to be a better-than-average year for US stocks, but many people are likely unaware that commodities have kept pace with equities—even led them for much of the year—as shown by this comparison of the Bloomberg Commodity Index and the S&P 500 (SPX):

Chart 1: S&P 500, Bloomberg Commodity Index, 12/31/20–12/17/21. Commodities kept pace with stocks.

Source (data): Power E*TRADE, Bloomberg (For illustrative purposes. Not a recommendation.)

Although crude oil and other energy markets have been responsible for a good portion of the gains in most commodity indexes (especially earlier in the year), they haven’t been the only ones on the move in recent months. Through December 17, a dozen non-energy commodities were up 30% or more for the year, and five—oats, lumber, canola, coffee, and spring wheat—had each gained more than 50%.

By contrast, only five actively traded commodities had negative year-to-date returns at the end of last week, and only one (palladium) was down more than 20%.

Despite this apparent bullishness—which has occurred against a larger backdrop of rising inflation—some perspective is called for. True, many commodity indexes pushed to seven-year (or longer) highs this year, but since most of them hit roughly two-decade lows in spring 2020, they are still well below their 2008 or even 2011 highs. Nonetheless, this year’s surge in oat futures is a reminder that commodity rallies can occur when traders least expect them, and in lower-profile markets that many traders and investors often overlook:

Chart 2: March oats (ZOH2), January WTI crude oil (CLF2), Nvidia (NVDA), 2/11/21–12/17/21. Oats roll to record highs.

Source: Power E*TRADE (For illustrative purposes. Not a recommendation.)

Drought conditions in Canada and the Northern US, supply squeezes, and increased demand because of new products like oat milk helped drive March oat futures (ZOH2) up more than 100% between mid-February and December 171—much more than crude oil, and even more than one of the year’s top-performing stocks, Nvidia (NVDA).

Today’s numbers include (all times ET): Mortgage rates (7 a.m.), Q3 GDP, final (8:30 a.m.), Chicago Fed National Activity Index (8:30 a.m.), Existing Home Sales  (10 a.m.), Consumer Confidence (10 a.m.).

Today’s earnings include: CarMax (KMX), Paychex (PAYX), Cintas (CTAS).      


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1 The Wall Street Journal. Oat Rally Reaches Records Amid Drought. 10/15/21.

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