So the S&P 500 is doing great right? Making new highs. It is exactly what the Fed wants to happen with quantitative easing. From Bernanke's Washington Post op-ed:
"This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion."
However, if you priced the S&P in precious metals or commodities, it either made new lows or flatlined since QE1 or early 2009 when the market bottomed. The S&P priced in Silver just broke through the March 2009 low, the S&P priced in Gold is not that far off (watch the descending triangle inflection point), the S&P priced in Copper and Cotton (ETN) got annihilated and the S&P priced in Oil flatlined. So in real terms equities have underperformed most commodities and precious metals. Will these commodity spikes, especially in the agricultural space, ever squeeze household budgets or S&P margins going forward? Or will the US Dollar and/or 10-year note sub 2% (Bob Janjuah of Nomura) force people into equities either way.
S&P 500 priced in Silver ($SPX/$SILVER) - Stockcharts.com
S&P 500 priced in Gold ($SPX:$GOLD)
S&P 500 priced in Copper ($SPX:$COPPER)
S&P 500 priced in Cotton ETN ($SPX:BAL)
S&P 500 priced in US Dollar Index (*S&P is already priced in USDs)
See recent posts on cotton, corn, wheat or commodities.