For far too long, strategic allocators and investors have focused on only two asset classes: stocks and bonds. But the way I learned it growing up, there was more to the investment world. There were commodities.
Yes, stocks should remain a major component of portfolios. But when we think about why bonds and commodities are there, the answer is diversification. As we have been pounding the table on for years, bonds were a great diversifier to stocks... until they weren't.
If you're not paying attention to the commodity space, you're doing yourself a disservice.
S&P 500 and NASDAQ 100
Both moved higher last week. Both remain above their rising 60-week moving averages. Both remain bullish.
The odds continue to favor new highs for the NASDAQ 100 following the recent breakout in the S&P 500.
Source: Optuma
Breadth
For the past two weeks, we've said that new highs in the NYSE Advance/Decline Line would be a key confirmation point for the health of the equity trend. New highs are exactly what we have.
What's even more compelling is that the S&P 500 and the NYSE Advance/Decline Line are making new highs without significant help from the Mag 7. The market is powering higher with broad participation. It is not beholden to the largest stocks or a single AI narrative.
Source: Optuma
S&P 500 Volatility Index
Not only are the new highs in the S&P 500 being confirmed by breadth, but the S&P 500 Volatility Index (VIX) is now trading at its lowest levels of 2026.
It's important to note that while the VIX tends to mean-revert after spikes, the opposite is not necessarily true. Low VIX readings do not typically signal an imminent jump in volatility or an imminent decline in stocks.
Source: Optuma
Aggregate Bonds
While the picture for equities remains bullish, aggregate bonds remain choppy. The trend is sideways. The 40-week moving average is flat.
In a word, bonds are "meh."
Source: Optuma
Commodities
The iShares S&P GSCI Commodity-Indexed Trust is a much more compelling chart than bonds right now. Commodities are moving sideways, yes, but that consolidation is taking place above a rising 40-week moving average.
The key level to watch remains the 2012-2013 highs. If that barrier is broken, commodities could add significant value to diversified portfolios.
Source: Optuma
Final Thoughts
Stocks remain bullish. Breadth is confirming the trend, and it is encouraging to see that market strength is not entirely dependent on the AI narrative.
That allows us to turn our attention to the diversifiers.
Bonds are drifting sideways with little conviction. Commodities, on the other hand, are quietly building what could be one of the most important bases in asset markets. One group is treading water. The other is knocking on the door of a potential breakout more than a decade in the making.
Investors have spent years thinking in terms of stocks and bonds. It may be time to start thinking about stocks, bonds, and commodities.
