The CRB commodity index has been a good relative indicator of global risk appetite. During stressed conditions the expectations for global growth declines, forcing commodities lower. Oil prices for example respond to the upside during periods of economic growth. But they also move up due to regional tensions such as those associated with Iran. The CRB index on the other hand tends to respond mostly to growth expectations only.
The index peaked in the first half of 2011, driven by QE2. In the past 9 months the index has found a support level at about 293. This is the third time during the period that we've approached this level, and it looks as though we are again going to bounce up. But it tells us that this period of financial stress driven by Europe and the US slowdown is similar to what we experienced in September and December of last year. This will be one of the key indicators to watch for early signs of financial stress conditions going forward.
|CRB commodity index|