NEW YORK (TheStreet) -- I was talking with Joe Deaux about the general weakness of many commodity prices and whether it is giving an indicator of bad global growth to which we need to pay attention.
If you think about the worst-performing stocks for the past several years, many of them turn out to be commodity stocks, particularly coal and copper stocks. On a list of horrible performers you'd have Peabody (BTU), Alpha Natural Resources (ANR), Vale (VALE) and Freeport-McMoRan (FCX), among others. That's normally been a sign of a contracting global economy, and I cannot remember another time when we've had strong and sustainable growth without a robust commodity market.
Commodity weakness, and particularly base metal weakness, is nothing new, and yet the stock market has done fantastically well in the last two years. Many have believed the much of that strength has been attributable to the Federal Reserve's quantitative easing. But now that the tapering of QE is not just a prospect but a reality, it might perhaps be time to listen to the commodity markets again.
The picture they paint is not a pretty one, especially for the emerging markets. Copper prices that have consistently hovered just above $3 a pound have described weakness in China and other Asian markets long before recent weak PMI reports signaled a slowing of GDP growth there. That emerging-market weakness has been blamed for the recent selloff in our own stock market.
But continued low prices for coal and other base metals make me question whether this selloff is just a correction, as many market analysts think, or a more serious symptom of a deeper problem in the global economy.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV