Study: what the commodities crash (copper & gold) means for commodities and stocks
As you probably know, commodity prices have been falling significantly over the past few months on Trump’s trade war, which has caused the U.S. Dollar to rise.
This has some bearish investors afraid of a few things:
“Contagion” from commodities and emerging markets to the U.S. stock market
An economic slowdown, because commodity prices are “supposed to” reflect economic data. Conventional thinking states that falling commodity prices = falling demand, which signals a slowdown in the economy.
These 2 fears are unsubstantiated. Commodity prices are driven by their own supply and demand. These days, commodity demand has more to do with China than the U.S. Hence, falling commodity prices is more symbolic of problems in China (and emerging markets) than the U.S.
Here’s the data to prove it.
Copper has now fallen 9 out of the past 10 weeks. This is what happens next to copper (historically)