Copper has hit the skids, and that’s bad news both for the global economy and for the U.S. stock market.
The base metal has dropped 26 percent so far this year, with almost all the decline coming this month. Prices hit a 14-month low of $6,800 a metric ton on the London Metal Exchange Sept. 26.
Copper’s importance to the economy stems from the fact that it’s used to produce so many goods – from iPads to indoor plumbing to electrical wires, The Wall Street Journal reports.
And as goes the economy, so goes the stock market. Thus copper has strong predictive value for stocks. So far this year, the Standard & Poor’s 500 Index has far outperformed copper, sliding 9 percent.
But stocks may soon catch up.
"You're seeing copper's declines outpace equities', which is telling me that equities are too buoyant at this point in the recovery," Adam Klopfenstein, a strategist with MF Global, tells The Journal.
Copper has led the way for stocks before, particularly during the financial crisis, when the base metal hit bottom in December 2008 and then stocks kept falling until March 2009.
Many copper experts anticipate further price declines. A Bloomberg survey of 16 traders and analysts produced a median forecast for a drop of up to 10 percent by year-end, to $6,500. That compares to an estimate of $7,773 a week ago.
© 2022 Newsmax Finance. All rights reserved.