Grow Your Portfolio the Intelligent Way

The Caution of Commodities

By Jim Woods

One of the most startling charts I’ve seen in a long time is the DB Commodities Tracking Index Fund (DBC).

This is the widely followed benchmark index of the commodities space, and it includes the metals, grains, oil, soybeans and sugar. The broad-based nature of DBC means it’s a great way to get a handle on global commodity prices.

It’s also a great way to see what global demand looks like.


As you can see, the chart here of DBC looks downright ugly, with the fund now falling to all-time lows. The current price of DBC is way below its 50- and 200-day moving averages, and the route in the sector has actually picked up a lot of steam just since July.

DBC is down nearly 38% during the past 12 months, and there is no doubt that this fund is in a confirmed bear market.

So, why are commodities plunging so much?

The main reason is global demand, which can be translated to a lack of global growth.

While some pockets of the world are seeing economic good times, major commodity consumers such as China are struggling to keep up the pace of growth.

Add to this mix a distinct oversupply of crude oil, or a “global oil glut” as many are calling it, and you get a distinct sense of discomfort about where the economy is headed.

Given this current situation, we are seeing many commodity-related pressures on global equity markets, particularly in the emerging markets. That segment also is in a bear market this year, and that’s a cautionary tale for stocks in the broader international markets and right here at home.

If you want a complete picture of how global markets are being influenced by the commodity plunge, then I strongly encourage you to check out this week’s brief four-minute Weekly ETF Report video.

This video will show you how DBC is at the heart of the current global equity market action. It also will show you that even if you don’t own commodities, your money could be at extreme risk.

Check out my Weekly ETF Report video today.

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