Let’s take a look at a variety indexes, one commodity, and one commodity-related index
Copper , TSX, S&P and, to a muted extend, Australia have kept pace making new highs.
Copper has been a hell of leading indicator so far in the grand reflation endeavour that started 2009.
We see that the Baltic Dry Index (BDI) has not been doing all that well. There has been a significant drop in the amount of shipping. Can it be that most of the rise of commodity prices are because of monetary reasons and not necessarily because of economic reasons? Is that why the emerging market EEM has been lagging the performance of TSX and Australia?
I mean, OK, two commodity centric indexes have been doing well, but a major group of commodity consumers are not looking all that strong.
Let’s take a look at a bunch of other indexes
Brazil, India and China all lag the recent highs by S&P, Copper and TSX
So, is the recent high a North American phenomena?
Yes, Russian (RTSI) index is doing fine, but I continue to refuse to regard the Russian index as an index of a free (whatever that might mean) market
Overall, it’s a non-uniform picture. Different countries, or securities go through different cycles. The important thing is the long-term trend that is still up for all of them, and flat for China.
Copper may still stay an important indicator. It has responded well to economic conditions. It has responded well to monetary conditions.
As I mentioned some posts ago, money (liquidity?) drives the capital markets. Favorable economic conditions may persuade money to stay in the capital markets.
A better global economy should see the Baltic index improve and the emerging markets improve. Without that, IMHO, we will be at the mercy, and the largesse of monetary policies for continued strength in major indexes.
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