If you’ve been consuming financial market-related content for a while, you’ve probably heard the phrase “Dr. Copper” at some point. Well, the doctor was in today, so let’s hear what he had to say. 👂
For those of you confused, market participants often refer to copper futures as “Dr. Copper.” The reasoning is that copper is an industrial metal critical for most aspects of global economic growth. As a result, investors and traders will often use copper futures as a liquid market to express their views of the economy. And for those that don’t trade it directly, they look at it as a barometer for the overall market’s economic outlook. 🧭
So why is it relevant today? Well, since the Covid low, Copper prices have been trending higher, making higher lows and higher highs in price. That ended in 2022 when prices failed to sustain their new highs in March and then made a “lower low” throughout the summer. That action essentially signaled that the longer-term trend in copper had shifted to sideways…signaling uncertainty about the global economy. 😬
Since bottoming last July, prices have been slowly ticking higher, picking up steam in October along with the stock market. However, prices stalled in January and have been sitting in a range since….at least until today.
Prices just broke down to fresh year-to-date lows. And bearish market participants suggest that’s not a great sign for the global economy. They argue that the January price peak marked copper’s first official “lower high” in price and that it’s headed for a retest (and break) of last year’s lows. And if prices of copper are trending lower…then that means the market is not super optimistic about the economy. 🐻
Obviously, this is not a surefire sign of anything. We all know markets move for a variety of reasons. And we also know financial markets don’t always accurately reflect economic reality. With that said, it is currently on many folks’ radars…so we figured we’d explain why.
For now, we’ll have to wait and see whether Dr. Copper’s bearish diagnosis is accurate. Or if the economy can shake off these worries like it has many others. Stay tuned… 🤷