Commodities are Quietly Outperforming

Igor Manukhov - Jan 21, 2025

While all eyes are on Trump and the stock market, commodities have quietly started to outperform stocks.

As I was going through my chartbook, I came across something that I haven't seen in a while: commodities are starting to outperform stocks. I track commodities through the US Commodity Index Fund, which tracks a basket of commodities ranging from gold, oil, copper, to frozen orange juice, soybeans and many others.
 
Below are relative strength charts comparing the performance of the US Commodity Index Fund against the S&P500 (black line) and the TSX (red line). Both relative strength lines have crossed above their respective long-term trends (purple lines). Technically, these relative stregth lines are still in longer-term downtrends because the purple lines (the 30-week moving averages of the relative strength lines) are still trending downward. However, the most recent commodity rally suggests that it would be wise to track commodities more closely.
 
If this change in relative strength persists and stocks continue to be volatile, commodities may save the day. After all, back in 70s and early 2000s when stocks struggled, commodities performed quite well.
 
I will be adding this index and several individual commodities to my watchlist.