We try not to get too concerned with reasons as to why……we are more concerned at what is happening and whether or not there is enough evidence to support that behavior in the market. We have tried to pick just four charts that suggest the world economy is picking up. Our attempt here is to let the market do the talking……..because the market is always right, it has an unrivaled record of correctly anticipating everything…..including seemingly random events.
We have chosen, a broad commodities index (the CRB CCI), a global shipping fund (SEA), a global coal producer fund (KOL), and an emerging market small cap fund (DGS).
Commodity price behavior is objective, commodity prices go up because of demand outstripping supply…..typical behavior of a phase of economic growth. Such a phase should also be associated with commodities outperforming bonds….that is happening, CCI relative to AGG is at (albeit near) a multi-week high.
Of course increased economic activity can only take place if there is global trade……what better way to understand what is happening in the “global trade space” than to look at how the market is treating shipping stocks relative to the broad market. SEA relative to the S&P 500 ETF “SPY” is at a multi-week high. This behavior confirms the behavior of the CRB CCI index.
And just for good measure……….what commodity, that is not a member of a traded commodity index, lies at the heart of industrial activity and is the 2nd only to crude in terms of volume shipped at sea? You guessed it – coal! If there is any “substance” to the rise in commodity prices and the outperformance of shipping stocks relative to the S&P there should also be outperformance of coal stocks relative to the S&P……yet again another multi-week high.
And, from a global perspective, what stocks are the ultimate “growth” stocks? No the ultimate growth stocks have nothing to do with sectors….or historical growth rates….or ROE. They are in fact emerging market small cap stocks. Emerging market stocks are firing both in their own right and relative to the S&P. This behavior is confirming the three charts above:
The market is clearly anticipating growth…….who are we to question the markets true intentions.
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