CRB index which has taken a severe beating in precious metal, industrial metal and energy sectors has seen an evident drop from 483.2 in Jan 2013 to 476.56 this May 2013. The fall in major commodities can be attributed to weakness in global growth which is seen from past 3-4 months and release of less than encouraging GDP numbers from US, Europe and China plus concerns have emerged on supply side too. Since start of 2013, manufacturing sector of major developed and emerging economies are slowly dipping and many are in contract zone (below 50.00) raising concern over global demand growth that weighed on returns.
On other hand, Equities are rising considerably with major indices testing to multi year or record high as seen from past few sessions. The benefit is largely been offered by the central banks easing policy which have flooded market by keeping interest rates almost nearly zero and simulating economy in form of bond buying (QE) to spur growth. Most developed nations are now using easing policy by their central banks, to deal with problems such as low growth, unemployment and overhangs of high levels of government and consumer debt. Now recently, we have seen most emerging markets are trying to recoup with slowing growth by reducing interest rates that has been followed by Australia, South Korea, India & Poland to boost their economies which is indirectly favoring their equities too.Concluding, ongoing easing program by central banks and global economic slowdown will continue the divergence between CRB and MSCI ACWI Index.The graph shows the divergence between the CRB index (commodity revenue index) and the MSCI ACWI (equity index that consists of 24 developed and 21 emerging countries).
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