Stocks vs Commodities

The stocks-to-commodities ratio divides the total return of US equities by the total return of a broad commodity basket spanning energy, metals, and agriculture. It answers a question that returns to the fore every time inflation does: has owning the companies that consume and refine raw materials beaten owning the raw materials themselves? Because the line is rebased to 100 at the start of the common history, it measures relative performance, not a price. A rising ratio means equities have compounded faster than commodities; a falling ratio means the real-asset complex has pulled ahead.

The two legs represent the financial economy versus the physical one. Equities are claims on businesses that turn inputs into profits and pay dividends. Commodities are the inputs themselves — oil, copper, wheat, and the rest — which produce no cash flow and whose return comes only from price changes and the mechanics of rolling futures. Comparing them is a way of asking whether value is accruing to producers and processors or to the scarce physical resources they depend on.

A rising line means equities are leading commodities — the typical state of the world during disinflationary expansions, when input costs are tame, profit margins are healthy, and investors pay up for growth. A falling line means commodities are winning, which has historically coincided with supply shocks and late-cycle inflation, when surging input prices lift the real-asset leg while squeezing the margins embedded in the equity leg. The long downswings in this ratio map closely onto the inflationary decades that punished financial assets.

On fairness between the legs: equity returns include reinvested dividends, which compound powerfully over decades. Commodities pay no income at all, so the basket's total return reflects price moves plus the roll yield of holding futures rather than any dividend or coupon. That structural difference is one reason equities have tended to win over the very long run, with commodities shining in concentrated inflationary bursts rather than steady compounding.

Inflation and the commodity cycle are the central drivers. When inflation is low and stable, commodities lack a tailwind and equities compound steadily ahead; the ratio grinds higher. When supply is constrained or demand surges — oil embargoes, war, post-pandemic bottlenecks — commodity prices spike, directly lifting the denominator while raising the input costs that compress corporate margins in the numerator. The ratio therefore tends to fall hardest precisely when inflation is most uncomfortable.

Real interest rates, the dollar, and the global growth cycle matter too. Commodities are priced in dollars, so a weaker dollar tends to support them, while a strong dollar is a headwind. Late-cycle conditions, when capacity is tight and demand is still hot, classically favor real assets, whereas early- and mid-cycle disinflation favors equities. The ratio is thus a compact gauge of whether the market is rewarding the financial economy or bracing for an inflationary, resource-scarce regime.

The chart is defined by inflationary versus disinflationary eras. The 1970s — though largely before the cleanest data — were the archetypal commodity decade, with oil shocks driving real assets to crush financial ones. The 1980s and 1990s reversed that completely: collapsing inflation and a long equity boom sent the ratio sharply higher as stocks left commodities far behind. Around the early 2000s, a powerful commodity supercycle driven by Chinese industrialization pushed the ratio back down for much of the decade, peaking for commodities near the 2008 oil spike.

After the 2008 crisis and through the 2010s, weak commodity prices and a strong equity bull market drove the ratio to extreme highs in favor of stocks. The 2020 shock and the 2022 inflation and energy surge produced a sharp, if partial, snap back toward commodities. The recurring pattern is that these regimes last years and turn durably: whichever side has dominated for a decade tends to look invincible right before the inflation backdrop flips.

Each month the chart divides the total-return index for US equities by the total-return index for a broad, diversified commodity basket, then rebases the result to 100 at the first month both have data. The equity leg is a broad large-cap index with dividends reinvested. The commodity leg is a diversified index across energy, industrial and precious metals, and agriculture — a broad proxy rather than a single commodity like oil or copper — measured on a total-return basis that incorporates the roll yield inherent in holding futures.

Two caveats matter. First, the line is a ratio of two indices, not a tradable spread; you cannot directly buy 'the ratio,' and frictions such as fund fees, futures roll costs, and taxes are excluded. Second, because the series is rebased to 100, its absolute level is meaningful only against its own history, not as a price. The choice of commodity index also matters — different weightings, especially how much energy a basket holds, can change the picture — so treat this as a broad directional gauge. MacroRadar sources both legs from public providers and updates monthly.

Stocks vs commodities is the real-asset arm of the cross-asset family. It complements stocks vs gold, which isolates the monetary metal, and stocks vs bonds, which tests equities against safe income. When stocks are simultaneously losing to commodities and gold while bonds also struggle, the signature is a broad inflationary regime rather than a simple growth scare.

Inside the commodity complex, the copper-vs-gold and gold-to-oil-ratio charts decompose what is driving the denominator — growth-sensitive industrial demand versus energy and safe-haven dynamics. The energy-sector-vs-S&P-500 chart links commodities back into equities, since energy stocks are the part of the market most levered to the same forces. And the money-supply-vs-inflation ratio provides the monetary backdrop against which commodity-led inflation tends to play out.

The macro-regime panel above is the key lens for this ratio, because commodities are the asset class most directly tied to the inflation regime. A high, stretched ratio during calm, low-inflation conditions says the market is firmly favoring the financial economy — historically comfortable for equities, but also the kind of extreme that has preceded multi-year commodity catch-ups when an inflationary shock eventually arrives.

A falling ratio while inflation is rising and supply is tight tends to confirm a shift toward real assets. Neither pattern is a forecast. The purpose of the overlay is to see whether the relative-performance picture is consistent with the prevailing inflation and growth backdrop, or diverging from it — and divergences between a serene ratio and a turning inflation regime are often where the most important long-cycle reversals begin.

Many investors hold a commodity or real-asset sleeve precisely because it tends to lead when equities and bonds struggle together — the inflationary environments that hurt conventional portfolios most. The stocks-to-commodities ratio is a way to sanity-check that allocation against the macro backdrop: a ratio stretched to historic highs in favor of stocks has, in the past, often preceded periods when real assets quietly did the protecting, while a depressed ratio has tended to mark the late stages of an inflationary commodity run.

It is not a timing signal. The value is context — pairing the long-run relative-performance picture with the current inflation regime shown above helps frame whether today's environment has historically rewarded the financial economy or physical resources. Treat it as one input into a diversified, long-horizon plan. MacroRadar presents this as a historical indicator, not investment advice.