The ratio of the Commodity Research Bureau Total Return Index and the S&P 500 is basically the value of a standardized basket of commodities compared to the value of a basket of stocks – in simple terms how much stock you can buy with a fixed amount of commodities. It is noteworthy that:
- The 50-year average for this ratio is around 1.1 times
- During the commodity bull market in the 1970s, the ratio peaked at over 3 times
- The ratio is currently at a 50 year low of around 0.2 times far below the long-term average and just slightly higher than the low reached around 2000. In other words, we are still at a very low relative valuation between “hard assets” vs. “stocks.”
Equicapita is a Calgary based income trust which manages an RRSP and TFSA eligible SME private equity fund for retail investors.