Copper FMC and SPY

Who knew an industrial metal commodity, copper, a mining stock, FMC Corp. and the SPY ETF all have similar returns? I didn't but it shouldn't surprise me. Here's the VAMI* chart:

FMC=FMC Corp. Common Stock

SPY=S&P 500 SPDR ETF

Dec 2020 Copper Futures

Source: Barchart.com

What's interesting about this chart is that it isn't. While ALL are under stress, copper futures, the  FMC mining company and the S&P all went down in March but they all came back, near lockstep, together. They each had differing yet some similar headwinds:

• copper should have been dragged down by the collapsing commodity complex;
• FMC should be facing the demand destruction of the long ailing mining complex;
• the S&P is, well, the S&P, holding up despite dismal economics: 30MM unemployed, earnings collapse, looming bankruptcies and double digit declines in GDP!

Another way to look at this is the long feared correlation of ONE! When, as the theory goes, markets face shock and awe, crisis and fear, EVERYTHING falls together-the dreaded correlation of ONE.  That everything RISES together takes the idea a step further. Shock & awe, crisis and fear, may not be letting up, not YET giving way to the supply and demand characteristics of individual companies, individual commodities and individual markets. 

Going long the Dec 2020 Copper futures or FMC stock, even, may be another way to trade any expected recovery in the stock market and the economy. 

*VAMI=Value added market (or monthly) index, a measure of asset returns for a given period. 

Feel free to post comments.

Disclaimer: Posts are for education only and not investment advice, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors.

Commodity Market Lab for the Third Quarter 2019

The Third Quarter 2019 Commodity Market Lab_pdf is posted.

Commodity Outlook

The effects of toxic policy and erosion of international norms is finally taking a toll on trade, world economies and prosperity. Commodities, in spite of occasional price spikes, have lost most of their modest gains of the last two years. Instability at the top has lead to unstable markets worldwide. If this continues, we may yet re-learn the brutal lessons of tariffs and jingoism from the Twentieth Century.

Feel free to post comments.

Disclaimer: Posts are for education only and not investment advice, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors.