Is the super cycle over?

There are more articles about the super cycle being over, even with commodity prices rallying so far this year. The last few years have not been good for commodity indices, as a measure of overall commodity prices. Equity markets have done much better and even fixed income has outperformed the asset class. If an investor is waiting for the good old days of the 2000's, he may have to wait a long time. Commodities price increases have lead to a response in supply which has dampened the potential increase in price. If prices rise, there will be a rationing response. It may not come immediately, but there will be a change in demand. 

Commodities follow a long cycle based on the response of supply to higher prices and the rationing of demand. There is some evidence that when commodities are increasing there will be less increase in equities. Commodities as an input in the production process will slow earnings growth or at least this is a story that can be applied in the long run. The current increase in stocks is partially tied with the fact that commodity prices have slowed. 

The China and emerging market growth story has changed. Growth rates have slowed and the need to accumulate hard assets has diminished. Stocks can be sold-off when there is less growth; consequently, we will see less upward pressure on price. we are seeing this with some of the industrial metals. We are also seeing less hording of gold as inflation fears have not been realized. When there is no supply shock from weather, commodity prices will slide. Oil has been rising but gains there is less fear about shortages. 

Any cycle may see the slope change. It is in the nature of cycles. It is important to realize that we are in a different phase with commodities, one of slower growth.