Green Shoot That Are Copper Colored
What most people consider to be evidence of “green shoots,” I disagree with. The idea that re-opening is equivalent to recovery is just plain wrong. We are still in the midst of biggest economic downturn in history and some segments of the economy are experiencing irreparable harm.
Copper is the exception. Copper is strongest green shoot that I can find.
The chart below shows the nearby futures price for copper. Copper prices have fully recovered and now at trade at higher than pre-crisis levels. Copper is really the only market that is fully confirming the equity market rally.
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Copper is often said to have a Ph.D. in economics, because of its success in identifying turns in the global economy. Copper serves as a proxy of global growth because of its widespread use, in areas such as: housing, manufacturing, power generation and transmission, etc., etc., etc.
Dr. Copper is agreeing with the equity market run. Copper prices have been on a fairly steady incline since the March lows, and have now more than fully recovered.
It is also worth noting that the increased demand for copper seems to robust (i.e., it is legitimate). In other words, if the demand spike was due to someone, such as China, building up its strategic reserves, it would be short-term story and less likely to be sustainable.
Our second chart below shows that inventory levels have been drawn down during this recent run-up in price. This chart confirms why I think the spike in copper prices is the most important piece of information, regarding green shoots.
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