The Relevance Of Copper To The Economy And Stocks
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Due to its widespread use across a variety of economic areas, copper is one of the most significant base metals. Demand for copper has consistently been a dependable early indicator of the state of the world economy.
The ISM Manufacturing PMI, which is generally regarded as a key indicator of the health of the US economy, and the change in copper price over the past year (YoY) are closely correlated (Figure 1).
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According to the correlation between the YoY shift in the price of copper and the S&P 500 index, this base metal is also a trustworthy indicator of economic cycles (Figure 2). Hence, "Dr. Copper" in market jargon.
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Disclaimer: These illustrations are not a solicitation to buy or sell any ETF. I am not an investment advisor/broker