February, 2015
It’s easy to write off oil’s plunge as an isolated event. The storyline of increased supply due to fracking and OPEC’s strategy to bolster market share seems like an open and shut case to explain the price collapse. Looking just beyond this market, however, spotlights something potentially more concerning - oil isn’t the only commodity that has crashed from its highs.
From natural gas to iron ore to wheat to copper, key commodities are on average over 60% off of their highs. Interestingly, oil and iron ore, two economically-sensitive commodities that are critical building blocks in a growing global economy, are nearly 2/3rds off their highs. An inquisitive mind has to question whether growth is faltering globally on a grander scale than currently recognized. Crashing commodities present a potential warning to complacent equity markets.
