According to Sevens Report Research, the copper price has become the best indicator for stocks over the past 18 months. In a note released by the founders, tumbling prices should worry stock market investors.
Essaye points to past examples as evidence. For example, in early 2018 copper prices decoupled from the stock market. What followed was a massive stock-market selloff. Likewise, when copper prices exploded upwards in Q4 2018, positive volatility returned to the stock market.
In 2019, the metal has continued to rally for much of the year thus far. The stock market has followed, as expected, reaching record highs.
However, with the looming trade war with China, copper has trended downward. If Essaye is correct, these decreases may foreshadow greater losses for the stock market.
Copper Prices Under Pressure
The main reason for copper’s price decline recently has been the slowing Chinese economy and its escalating trade war with the United States.
According to Essaye, the current decline in copper’s price would correlate with a drop of around seven percent in the stock market. The stock market experienced turmoil in late 2018 but has since recovered. Despite the elation from investors, the stock market is pretty much exactly where it was last October. The issue is that the socio-political situation has deteriorated during this same time.
As Stock Worries Mount, Bitcoin Rides High
Although almost all financial assets are feeling the squeeze by the China-U.S. trade war, Bitcoin has been noticeably absent from the chaos. Instead, it has reached new yearly highs breaking upwards by 60 percent since April 15.
Somehow, the leading cryptocurrency has experienced a boost from the deteriorating economic and political situation. It is yet unclear if copper’s price fluctuations have a direct or indirect correlation to Bitcoin (BTC). However, as time unfolds and Bitcoin grows older, we may soon see emerging patterns.
Do you believe copper’s price fall indicates a potential disaster for the stock market in the near future? Let us know your thoughts below.
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