At the beginning of May, Copper prices jumped, threatening to break out of a 4 year bear market, but stalled at the down-trend line just below $3.00 and have fallen since, leaving the down-trend intact from 2011 intact:
Broadly speaking, this looks (for the moment) to be a disappointing development, but coincides with the most recent economic data which shows global economic growth to be stalling.
One of my "Themes" for 2015, is that the US economy, which contracted in the 1st quarter of 2015, is expected to pull the global economy along in the 2nd half of the year.
However, data for the 2nd Quarter, thus far, is yet to impress:
Earnings Expectations (for the S&P 500), a key fundamental for stock prices, are expected to show declines in of 4.4% in Q2 and .6% in Q3, but a rebound of 4.8% in Q4.
The consumer in the US represents close to 2/3 of the economy and of late the consumer has not been participating and consumer sentiment has been slipping. Is this, as the US federal reserve believes, a temporary situation or are we seeing a more fundamental shift as Baby Boomer's become more frugal heading toward retirement and Millenial's have different spending and consumption habits?
This morning, the US Personal Income and Spending data for April revealed a consumer who continues to save, income grew by .4% and spending was unchanged.
On the Inflation front, the Fed's key core PCE price index year to year change (target 2%) fell from 1.4% to 1.2%. Clearly, the fed has time on its side as far as the need to begin the normalization of interest rates and this may put the expected September interest rate increase onto less certain ground.
Expect the Unexpected!
No blog post tomorrow morning, but feel free to tune in to our weekly webinar, the recorded version will be posted tomorrow evening
Scott Tomenson,CIM Managing Partner, Chief Investment Strategist