Study: Commodities Bull Market Still Has Juice

A new study from Ned Davis Research analyzing commodities markets since 1800 indicates that the 11-year commodity bull market isn’t over.

The report produced by John LaForge and Warrien Pies concludes that six conditions are present when commodity bull markets end, according to MarketWatch. Only one of the six has arisen, and another is close, they say.

Thus it’s unlikely that “commodities have met their final end.”

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

The six factors:

1. Commodity bull markets have burst like bubbles. But over the past 18 months, commodities prices are little changed.

2. Duration of the bull market. This is the close one. The rising market is within two years of the average upward cycle since 2000.

3. Overvalued prices. This is the bearish sign. Compared to long-term trends and other asset classes, some commodity valuations are “stretched.”

4. Shrinking money supply. While global money supply growth has slowed, it continues.

5. Surging real interest rates. “One of the strongest pieces of evidence to suggest the bull continues” is historically low rates, LaForge and Pies say.

6. Stocks are set for a long bull market. That’s not the case now, the researchers argue.

While commodities posted their biggest rise of the year Friday after Europe’s debt agreement, some experts remain cautious.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

"Only when you have structural fixes can you think about a third quarter that will look a lot more positive," Pau Morilla-Giner, manager of London & Capital's Global Commodities Fund, tells Bloomberg.