Is the Market blind? Or has Copper lost its Doctorate?
There are some pretty fascinating divergences happening at the moment. The current weakness in copper compared to strength in most risk assets is particularly striking to me. For the first time in over five years, Dr. Copper and other risk assets (stocks, high yield bonds) are moving aggressively in opposite directions. A case can be made that copper has lost its predictive ability because cap-ex spending is not central to the current global growth story. Perhaps that is so. Or perhaps “risk assets” have simply lost their ability (or desire) to discount future risk? Either way, the current divergence is strikingly inconsistent with the historical correlation between U.S. stocks (SPY) and copper (JJC):