Doctor Copper: Market Commentary from Cabana’s CEO – February 25, 2019

10 months ago

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Below is a snapshot of last week’s market performance and what to watch in the weeks ahead from Chadd Mason, Cabana CEO and co-founder.

U.S. and international equity markets posted another strong week last week. We saw huge moves up in commodities, especially copper. Copper is considered a great indicator of the health of the world economy, so much so that it is often referred to as “doctor copper”. This is due to its use in areas of manufacturing and industrial processes. Following that line of thinking, it appears the patient is improving. The iPath Bloomberg Copper Index jumped almost six percent last week.

The strength in commodities coincides with out-performance in emerging markets, like China and Brazil. It has been a long time since those markets have outperformed anything. These conditions are also consistent with the pullback in the U.S. dollar. Commodities and commodity-producing economies generally perform better when the dollar weakens.

Despite all this good news over the past week (and since the new year began), we have yet to see a bounce in interest rates, which would be expected in the face of renewed growth prospects. This may simply be the result of ongoing weakness in Europe. If Europe’s interest rates remain depressed, particularly Germany’s, downward pressure is put on U.S. interest rates. The continued subdued interest rates do help corporate bonds, real estate and dividend paying stocks. Utilities are at all-time highs. All in all, it was a really good week!

Finally, the volatility index (VIX) broke below 16 and is now at 13.51. This index drops when investors begin to feel more confident and rises when they become anxious. Its current level is approaching the lows of last year and suggests that people are feeling much better than they did a mere two months ago. For reference, it was at 25 for much of the fourth quarter of 2018 and reached 39 at the end of the year.

You have to be amazed at the workings of our markets. It truly is a microcosm of the entire world’s psychology. At one point it seems bleak, dark and hopeless, and a few short weeks later, the clouds have parted and the sun is shining.

Download a PDF of this week’s market commentary at the following link: Weekly Market Commentary February 25 2019

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