Great note this morning from the always informative David Rosenberg. Mr. Rosenberg notes something that we have highlighted in the past – China as a leading indicator. In this case, Mr. Rosenberg highlights China’s high leading correlation with commodities. Is China forecasting a decline in commodity prices? Rosenberg elaborates:
“To very little fanfare, the Chinese stock market — the first index to turn around in late 2008 — has slipped into a bear market. It is down 15 % from the nearby high and 20% from last year’s interim peak. Why this is important is because the Shanghai index leads the CRB commodity spot price index by four months with a 72% correlation (and over an 80% correlation with the oil price). Don’t get us wrong — we are long-term secular commodity bulls; however, we have been agnostic this year from a tactical standpoint — never hurts to take profits after a double!”
Source: Gluskin Sheff
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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