How bad has the bear market in commodities been? After a 16% decline year to date and a 35%+ decline since the 2011 high, the CRB Commodity Index is now at a multi-decade low. It’s actually a surprisingly poor return given that commodities tend to generate a return in-line with the rate of inflation.
Of course, the CRB index is petroleum heavy so the recent downturn in oil has been particularly harmful, but it adds some fodder to the argument that commodities don’t tend to be a very good long-term holding in a portfolio. As I’ve stated in the past, commodities are unproductive assets that are little more than cost inputs in the capital structure. Therefore, there’s no reason to expect them to generate substantial returns over the cost of production.