Founded in 1957, the CRB Index is comprised of 19 different commodities ranging from cocoa, coffee and orange juice to live cattle and lean hogs to crude oil, gold and silver. The index weightings are approximately 40% energy, 40% agriculture and 20% base and precious metals.
Relative to the S&P 500, the CRB Index has never been cheaper. Ever. The implications of dirt cheap commodity prices are vast and various. If inflation is finally returning, investors should take note. Rising inflation is not a friend to P/E multiples. Stock markets traded at single digit P/E's in the 1970's. An investment in a basket of commodity producers could provide a useful hedge and many are out of favour today. Energy producers and gold miners are just two examples.
The stock market is facing many headwinds and rising inflation in the face of record valuations is not an attractive proposition. A balanced portfolio of 60% equities / 40% bonds will not protect a portfolio in the face of rising inflation. You need commodity exposure for that.
My Active Asset Allocator and Gold Trader strategies should stand out from the crowd as commodities (precious metals in particular) start outperforming the broader stock market in the years ahead. For more information, please contact me at email@example.com or by phone at +353 86 821 5911.
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