If Saudi continues to pump oil to hold its market share, then maybe oil has further to drop (and Chinese CPI) but since the troughs of Chinese CPI, commodities have performed well. The chart below shows the time periods of trough negative Chinese CPI to peaks in history with generally large returns of commodities following the low inflation. On average in these three periods, the S&P Gold, Copper and Petroleum returned 33.3%, 55.6% and 101.6%, respectively.
Source: S&P Dow Jones Indices LLC. All information presented prior to the index launch date is back-tested. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. Past performance is not a guarantee of future results. Please see the Performance Disclosure at http://www.spindices.com/regulatory-affairs-disclaimers/ for more information regarding the inherent limitations associated with back-tested performance.
This article was written by Jodie Gunzberg, global head of commodities, S&P Down Jones Indices.
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