Historical Performance of Commodity and Stock Markets
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This paper examines two interrelated issues in commodity markets, namely, the cyclical
relationship between stocks and commodities and the function of commodity and agribusiness
indexes in portfolios. A high negative correlation has existed between stock and commodity
prices over the past 140 years. Moreover, the two markets have alternated in price
leadership with 29–32-year cycles. The recent price dominance in agricultural commodities
started in 2000, a result supported by the empirical results of the portfolio allocation analysis.
For a risk-averse investor, irrespective of the period analyzed, placing funds in agribusiness
and/or agricultural commodity indexes was sound investing.