I understand your point about low commodity prices being a positive to overall global economy, especially net importers. However, is not low commodity prices (especially industrial metals) a sign of weakening economies and especially the high growth economies such as China? Coupled with weak transport index in US, it appears to me that fundamentals are not supportive of equity market valuations. Thoughts? 

David Fuller's view

Thanks for an interesting and challenging email of general interest.

Low commodity prices are beneficial for importers, not least in terms of contributing to lower price inflation and ensuring that there is more revenue for other projects.  Historically, low prices for industrial commodities have been a sign of slow GDP growth and this is partly true today. However, we also have some positive deflation, mainly due to an unprecedented level of rapid technological innovation.  This lowers commodity production costs and also leads to some substitution of manmade materials. 

I share your concern for the weak US Transport Average, as you probably know.  This is partly due, I believe, to the transporting of less, coal, oil, ore and metals. 

American corporations have done a good job of outperforming slow US GDP growth, thanks to technology, globalisation and very low interest rates.  However, they have also flattered earnings through share buybacks, which have helped shareholders and been very lucrative for management.  The strong Dollar Index remains a headwind for multinational corporations, although some manage it better than others.