Looking back to 2008, commodities plunged dramatically and the index fell 56% to its lowest level since 1949. What followed was the greatest stock market crash since the Great Depression.
Other movements indicate a slowing of economic activity worldwide. China's Purchasing Manager's Index fell 53.9 from 55.7 in April. In Europe, the debt crisis there is putting a damper on demand. Philip Gottheif, of Equidex Brokerage Group said: "Raw materials may drop another 10% because the economy is on the "cusp' of deflation. A slowdown in Europe would affect China's exports. Europe is the biggest destination for Chinese exports.
To summarize, a slowdown in commodity demand signals a slowdown in economic activity. If countries like China are exporting less, they need less raw materials. That in turn puts downward pressure on prices.
We have no way of knowing if the current slide is temporary or if prices will resume an upward climb later in the year. What we do have a sell off in equity markets across the globe. The relationship between commodities prices and equity markets is one that bears watching.