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Recent commodity correction is over

As this chart shows, the commodity correction that started last May has now been completely reversed. This index of non-energy-related spot commodity prices is now at a post-recession high, and it is only 7% below its all-time high, registered in mid-2008.

This means that a) monetary policy is accommodative and inflation risks are not negligible, and/or b) global economic growth is at least strong enough to keep the U.S. economy from suffering a double-dip recession. In other words, the market is overly concerned about the health of the U.S. economy. As a corollary, it also means that should the Fed fail to announce some form of further monetary ease at the conclusion of tomorrow's FOMC meeting, this would not be a reason to turn bearish. Any market selloff would therefore be a buying opportunity.

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