Paging Dr. Copper!
Copper prices, often a good global economic barometer, are looking sickly as of late.
US consumers are clearly starting to struggle under the weight of inflation and higher interest rates. We’re seeing that in recent results from top American retailers. But the global economy might be teetering on the edge of a recession as well. That’s the indication the market is getting from the recent pullback in copper prices.
The price of copper, a metal used for a variety of industrial purposes, is often a good gauge of corporate and consumer demand. In fact, some on Wall Street refer to the reddish brown metal as Dr. Copper because of its track record for diagnosing the health of the economy.
Copper prices have tumbled nearly 6% this year and are now trading near their lowest level since November. And shares of several of the world’s top copper miners, including Freeport-McMoRan, BHP Group and Rio Tinto, are all down double digits in 2023.
Of particular concern? China seems to be wary of buying more copper. That’s a possible sign that the world’s second largest economy may be losing steam. And it’s going to be difficult, if not impossible, for the US economy and the rest of the world to grow steadily if China is struggling. (Despite the rise of economic isolationism/protectionism during the past decade, I still would like to think that decoupling is a myth. The nation’s biggest economic powers all need each other for everyone to do well.)
So keep an eye on Dr. Copper. If prices don’t rebound soon, that may be yet another sign of impending economic malaise. And that could lead to a cooling off of the 20203 stock market rally.