Global Economy: What Copper Prices Plunging to 5-Year Low Means for 2016
You don’t have to look far to see where the global economy is headed in 2016. Just look at two key indicators, copper prices and global trade, and you will get a quick idea of what’s in the cards for the economy.
As it stands, both of these indicators are pointing towards a global recession, one that is possibly worse than what we experienced back in 2009!
Copper Prices Plunge Near 2009 Low
Please look at this long-term chart of copper prices:
Chart courtesy of www.StockChart.com
Just a few days ago, copper prices hit their lowest level since 2009.
Copper is an industrial metal. If its price plunges, it suggests demand for copper is down. From this, we can easily assume factories across the global economy are slowing down their output.
Copper prices have been declining since 2011; they are down more than 50% since then. Copper prices should make those who are bullish on the global economy nervous, as they warn of a major slowdown ahead, possibly even a global recession.
Trade in Global Economy Stalling
Another indicator of activity in the global economy, the Baltic Dry Index (BDI), is also plunging, as the chart below illustrates.
Chart courtesy of www.StockChart.com
As this issue of Profit Confidential is published, the BDI has dropped to a record-low.
Why pay attention to this? The BDI measures the price of transporting raw materials by sea. It takes into account 23 different shipping routes and averages the cost of transporting goods via ship vessels. The lower the price of shipping, the less demand to ship goods like grain, iron ore, and coal, among other materials, to global ports.
The BDI tells us how demand and trade in the global economy look. If this leading indicator declines, it means the global economy is headed towards a global recession. When it rises, it suggests economic growth.
Global Economy and U.S. Stock Market
Dear reader, with one month to go in 2015, the stock market is lower today than where it started the year. Global economic indicators, like the ones I have talked about above, paint a very negative picture. Add to this the fact that earnings and revenues at the S&P 500 companies are contracting and we have reason to worry about 2016.
I continue to believe the stock market spent most of 2015 putting in a major top and that stock prices will have a very difficult year in 2016.
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