TREND ALERT: Bigger than Tariff Talk: Oil, Dollar, Dr. Copper Moving Markets

11 Jul 2018

Bigger than Tariff Talk: Oil, Dollar, Dr. Copper Moving Markets

KINGSTON, NY, 11 JULY 2018—Yes, global equities are diving as trade war fears heat up, but there are much greater fundamentals that are moving the overvalued and overleveraged markets, whose nine-year bull run, as we had forecast in February, has ended.

While the business media is focused on tariffs, there are three major trend indicators that are more formidable determinants of sustained market performance: oil, dollar and copper.

Bigger than the fear of trade wars, is the oil-war, accelerated by the Trump Administration's actions against Iran, which has, in part, driven prices up over 60 percent this year already.

Oil prices are dollar based. As the dollar rises and currencies of oil-importing countries decline, they are facing powerful downward economic pressures far greater than tariff threats.

For example, India imports some 80 percent of its energy needs. With its economy slowing and its rupee down 7.4 percent against the dollar, while brent crude prices plunged over 6 percent today, should oil again move toward the $80 a barrel range, it will put further downward pressure on its economy.

So too with China, the world's second largest economy. As we have detailed in previous Trend Alerts, China's economic indicators across a broad spectrum are falling, along with its yuan, which is now at an 11-month low against the dollar. Thus, should oil prices moderately slide, and the dollar rally continues, China's economy will be negatively impacted.


Another key market indicator is copper. From high-tech to heavy industry … across the construction, infrastructure and production spectrum, Dr. Copper is a bellwether of economic growth.

In just four weeks, copper has sunk 14 percent from a four-year high set June 7. Its sharp decline is a reflection of weakening demand, especially in China, which consumes some 50 percent of the world's copper.

TREND FORECAST: Again, it's rising oil prices, a strengthening dollar and spikes in U.S. interest rates that are poised to rattle global economies.

Already those factors are key elements that will lower market expectations for global growth from 5 percent at the start of the year to our forecast of 4 percent by year end.

Moreover, with global debt at a record level $247 trillion and rising at historically high rates, should the U.S. Federal Reserve aggressively raise interest rates, the debt burden will increase and risk levels will accelerate.

And, as we have noted in previous Trend Alerts, gold is the ultimate safe-haven commodity. Thus, if trade wars were imminent gold prices would be rising, rather than declining.

All comments

Other Trend Alerts
27 Jun 2018

TREND ALERT: Where are Markets heading? Follow gold, oil and the dollar

TREND ALERT® Where are Markets heading? Follow gold, oil and the dollar KINGSTON, NY, 27 JUNE 2018—Despite the business media clamor over recent declines in equity … Read more

21 Jun 2018

TREND ALERT: Going for the Gold: Buy or Sell, Now or Later?

KINGSTON, NY, 21 JUNE 2018—Gold sank to a six-month low. Where is it headed? Read more

20 Jun 2018

TREND ALERT: Trade Wars Won’t Sink Markets. This Will!

TREND ALERT® Trade Wars Won't Sink Markets. This Will! KINGSTON, NY, 20 JUNE 2018—President Trump's threat to launch a $200 billion tariff attack on China if they … Read more

14 Jun 2018

TREND ALERT: New Trump Bump? Or Will Tariffs and Trade Wars Sink Markets?

KINGSTON, NY, 14 JUNE 2018—U.S. equities have bounced back from correction territory and the Nasdaq hit new highs. Read more

6 Jun 2018

TREND ALERT: Cash-Juiced Markets Ready to Crash? Be Prepared

KINGSTON, NY, 6 JUNE 2018—After correcting in March, the Nasdaq hit a new high Monday and May was the best month for stocks since January. Read more