Raw Materials Topping Equities With Growth Intact: Commodities

Commodities are beating equities for a fifth consecutive year, a sign that demand from developing economies is sustaining global growth that drove prices up almost fourfold in a decade.

While the MSCI All-Country World Index of equities dropped 15 percent this year and yields on Treasuries fell to near- record lows, the Standard & Poor’s GSCI Index of 24 commodities rose 0.7 percent. Goldman Sachs Group Inc. expects commodities to return about 15 percent in the next 12 months. The last time there was a recession, raw-material prices slumped 43 percent.

The S&P GSCI more than doubled from a four-year low in February 2009 as shortages emerged. China, the biggest user of everything from energy to copper to cotton, will lead gains in a projected 6.1 percent expansion in emerging economies next year, more than compensating for the anticipated 1.9 percent growth in the developed world, the International Monetary Fund says.

“The odds favor that the emerging world has succeeded in producing a soft landing rather than a crash landing,” said James Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, which manages about $340 billion. “A crash landing would make it more like 2008 for commodities, but a soft landing means we probably are in an ongoing recovery, which makes it very likely that commodities go onto new highs.”

http://www.bloomberg.com/news/2011-11-27/raw-materials-topping-equities-with-economic-expansion-intact-commodities.html