Relative Market Returns Over the Last Six Months & Copper Continuous Contract (HG.F)
Equity markets continue to grind their way higher this week shrugging off last Friday’s bearish outside day correction. Most of the major world markets posted gains of 1.5% to 5.0% with the US and Canada toward the lower end of that range and another big rebound in China driven by new stimulus at the high end of the range.
Gains this week have been broad based across sectors with all eleven major industry groups in the green. The Energy and Materials groups lead the charge with gains of 2.5%-3.0%, upward momentum for Technology has slowed.
Individual Materials and Energy stocks have also been working their way up relative strength rankings tables propelled by recent gains in commodity prices. In particular, Copper has been on the move upward this week. Alternative currencies also continue to attract interest from investors with cryptocurrencies like Bitcoin moving into the mainstream and hitting all-time highs, along with traditional alternatives like Gold.
The main economic event of the coming week is next Wednesday’s Fed interest rate decision, statement, member forecasts and Powell press conference. Investors may particularly look for hints on how many times and when the Fed is thinking about cutting interest rates this year, and if they are intending to make any changes to their Quantitative Tightening program. The Reserve Bank of Australia meets on Tuesday, plus the Bank of England and the Swiss National Bank meet next Thursday.
The earnings calendar is very quiet this week, but there are a number of notable economic data reports on the way including US retail sales and producer prices today, US industrial production tomorrow, China retail sales over the weekend, Canada producer/consumer prices on Monday/Tuesday, and a number of real estate market numbers.
In this edition of Equity Leaders Weekly, we look at the relative magnitude of recent market moves across asset classes and at the recent rally in (Copper/Hong Kong) China-Sensitive markets.
Relative Market Returns Over the Last Six Months
This line chart shows just how explosive some recent gains in individual assets have been relative to broader markets over the last year.
Nvidia* (purple) has attracted a lot of attention in the business media and with the investing public as the leader of the “Magnificent Seven” and there is no doubt it has put in a very strong performance relative to the S&P 500 (grey).
Even NVDA’s gain, however, pales in comparison to the parabolic moon shot staged by Bitcoin since October as cryptocurrencies have gone mainstream. Interest in alternative currencies has spilled over into Gold (maroon) in the last few weeks. While the Gold price has also climbed to new highs, its return over the last year has been small relative to other asset classes.
*Shares of Nvidia are held in some portfolios managed by SIA Wealth Management.
Copper Continuous Contract (HG.F)
With its wide variety of applications in industrial and consumer products, Copper (HG.F) is widely seen as being one of the markets most sensitive to swings in the global economy. In recent years, due to its high demand for resources, business conditions in China have become a significant driver of Copper demand.Copper rallied in early 2023 on anticipation that China’s economy and resource demand would recover quickly from 2022 COVID lockdowns. When that fizzled out, so did the price of copper which retreated that spring. Copper spent the last nine months stuck in a sideways trading range between $3.50 and $3.90/lb.Since China’s government announced new stimulus measures over the last few weeks, China-sensitive markets, both stocks and commodities have been bouncing back. Yesterday, Copper broke out over $4.00/lb for the first time since last May. The completion of bullish Double Top and Spread Double Top breakouts also signals that a new advance has started.
Initial upside resistance appears in the $4.23 to $4.32 zone where several previous highs/lows and vertical/horizontal counts cluster, followed by $4.45 based on a different horizontal count. Initial support appears near $3.87 based on a 3-box reversal.
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