chapter 15 charts: predicting commodities · predicting the markets chapter 15 charts: predicting...

Predicting the MarketsChapter 15 Charts:

Predicting CommoditiesYardeni Research, Inc.

November 2, 2016

Dr. Edward Yardeni516-972-7683

[email protected]

Mali Quintana480-664-1333

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Please visit our sites atwww.yardeni.comblog.yardeni.com

thinking outside the box

Table Of Contents Table Of ContentsTable Of Contents

November 2, 2016 / Chapter 15 Charts: Predicting Commodities www.yardeni.com

Yardeni Research, Inc.

Predicting Commodities 1-17

52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 2270

170

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470

570

670

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170

270

370

470

570

670

CRB RAW INDUSTRIALS SPOT PRICE INDEX*(1967=100, ratio scale)

11/1

* Weekly from 1951 to 1981, daily thereafter. Includes copper scrap, lead scrap, steel scrap, tin, zinc, burlap, cotton, print cloth, wool tops, hides,rosin, rubber, and tallow.Note: Shaded areas denote recessions according to the National Bureau of Economic Research.Source: Commodity Research Bureau.

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Figure 1.

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20200

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C

11/1

CRB RAW INDUSTRIALSSPOT PRICE INDEX*(1967=100, daily)

C = China enters World Trade Organization.* Includes copper scrap, lead scrap, steel scrap, tin, zinc, burlap, cotton, print cloth, wool tops, hides, rosin, rubber, and tallow.

Source: Commodity Research Bureau.

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Figure 2.

Predicting Commodities

Page 1 / November 2, 2016 / Chapter 15 Charts: Predicting Commodities www.yardeni.com


1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 201830

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330

360

Dec

SepSepCHINA INDUSTRIAL PRODUCTION*(2005=100, sa)

* Value added basis.Source: IMF International Financial Statistics.

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Figure 3.

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20182

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6

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22

2

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22

Sep

CHINA REAL GDP & INDUSTRIAL PRODUCTION(yearly percent change)

Real GDP (6.7)

Industrial Production* (6.1)

* Value added basis.Source: Haver Analytics.

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Figure 4.




2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018200

300

400

500

600

700

2

4

6

8

10

12

14

16

18

20

22

Sep

11/1

CHINA INDUSTRIAL PRODUCTION & INDUSTRIALS COMMODITY PRICE INDEX

China Industrial Production*(yearly percent change)

CRB Raw Industrials Spot Price Index**(1967=100)

* Value added basis.** Includes hides, tallow, copper scrap, lead scrap, steel scrap, zinc, tin, burlap, cotton, print cloth, wool tops, rosin, rubber, hogs, steers, lard, butter,

soybean oil, cocoa, corn, Kansas City wheat, Minneapolis wheat, and sugar.Source: Commodity Research Bureau and Haver Analytics.

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Figure 5.

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018100

200

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500

2

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12

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22

Sep

11/1

CHINA INDUSTRIAL PRODUCTION & COPPER PRICE

China Industrial Production*(yearly percent change)

Copper Futures Price**(cents per pound)

* Value added basis.** Nearby futures contract.

Source: Haver Analytics.

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Figure 6.




85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 205

6

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22

11/4

CHINA REQUIRED RESERVE RATIO(percent)

Required Reserve RatioLarge Depository Institutions (17.0)

Small/Medium Depository Institutions (15.0)

Source: People’s Bank of China.

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Figure 7.

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20185

10

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40

5

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15

20

25

30

35

40

SepSep

CHINA M2 & BANK LOANS(yearly percent change in yuan)

M2 (11.5)

Bank Loans (13.0)

Source: People’s Bank of China.

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Figure 8.




2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20180

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10000

11000

12000

11/1

BALTIC DRY INDEX(1/4/85=100, daily)

Source: The Baltic Exchange.

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Figure 9.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018100

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11/1

11/2

INDUSTRIALS COMMODITY PRICE INDEX & COPPER PRICE

Copper Futures Price**(cents per pound)

CRB Raw IndustrialsSpot Price Index*(1967=100)

* Includes copper scrap, lead scrap, steel scrap, tin, zinc, burlap, cotton, print cloth, wool tops, hides, rosin, rubber, and tallow.** Nearby futures contract.

Source: Commodity Research Bureau and Haver Analytics.

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Figure 10.




67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 2125

50

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225

25

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100

125

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175

200

225

BOOM-BUST BAROMETER*(four-week average, ratio scale) 10/22

* Weekly average of CRB raw industrials spot price index divided by initial unemployment claims, showing four-week average.Note: Shaded areas denote recessions according to the National Bureau of Economic Research.Source: Commodity Research Bureau and US Department of Labor.

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Figure 11.

67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 2125

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225

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BOOM BUST BAROMETER*& BEAR MARKETS IN STOCKS(four-week average, ratio scale)

10/22

Note: Shaded red areas denote S&P 500 bear market declines of 20% or more. Yellow areas show bull markets.* Weekly average of CRB raw industrials spot price index divided by initial unemployment claims, four-week average, showing four-week average.

Source: Commodity Research Bureau and US Department of Labor.

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Figure 12.




2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018600

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10/22

11/1S&P 500 INDEX & YRI BOOM-BUST BAROMETER

YRI Boom-Bust Barometer*

S&P 500 Index

* CRB raw industrials spot price index (weekly average) divided by weekly initial unemployment claims, showing four-week moving average.Source: Bloomberg, Commodity Research Bureau, Department of Labor, and Standard & Poor’s Corporation.

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Figure 13.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 201850

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190

10/22

10/27

S&P 500 FORWARD EARNINGS & YRI BOOM-BUST BAROMETER(weekly)

S&P 500Forward Earnings*

YRI Boom-Bust Barometer**

* S&P 500 forward consensus expected operating earnings per share. Time-weighted average of the current year’s and next year’s consensus forecast.** CRB raw industrials spot price index (weekly average) divided by weekly initial unemployment claims, showing four-week moving average.

Source: Bloomberg, Commodity Research Bureau, Department of Labor, and Thomson Reuters I/B/E/S.

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Figure 14.




2003 2004 2005 2006 2007-50

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250

300

-50

0

50

100

150

200

250

300S&P 500 SECTORS PRICE INDEXES DURING BULL MARKET OF 2003-2007(percent change in US dollars)

Energy (223.2)

Materials (153.8)

Industrials (124.9)

Consumer Staples (57.5)

Health Care (43.6)Finance (83.1)

Information Technology (102.0)

Telecommunications Services (112.4)

Consumer Discretionary (81.4)

Utilities (138.7)

Source: Standard & Poor’s Corporation.

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Figure 15.

2003 2004 2005 2006 2007-20

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280

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320

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360

380MSCI SHARE PRICE INDEXES DURING BULL MARKET OF 2003-2007(percent change in US dollars)

UK (142.3)

EMU (215.4)

EmergingMarkets (367.4)

Japan (123.4)

US (96.7)

Source: Morgan Stanley Capital International and Standard & Poor’s Corporation.

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Figure 16.




95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 180

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11/1

11/1

EMERGING MARKETS MSCI STOCK PRICE INDEX (in local currencies)& INDUSTRIALS COMMODITY PRICE INDEX

Emerging MarketsMSCI Stock Price Index(local currencies)

CRB Raw IndustrialsSpot Price Index*

* Includes copper scrap, lead scrap, steel scrap, tin, zinc, burlap, cotton, print cloth, wool tops, hides, rosin, rubber, and tallow.Source: Morgan Stanley Capital International and Commodity Research Bureau.

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Figure 17.

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018200

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11/1

11/1

EMERGING MARKETS MSCI CURRENCY INDEX &INDUSTRIALS COMMODITY PRICE INDEX (US$)

Emerging MarketsMSCI Currency Index*

CRB Raw IndustrialsSpot Price Index**

* Includes Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines,Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey, and United Arab Emirates.

** Includes copper scrap, lead scrap, steel scrap, tin, zinc, burlap, cotton, print cloth, wool tops, hides, rosin, rubber, and tallow.Source: Morgan Stanley Capital International and Commodity Research Bureau.

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Figure 18.




2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017300

350

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550

600

650

700

.12

.14

.16

.18

.20

.22

11/1

11/1

S&P 500 MATERIALS & INDUSTRIALS COMMODITY PRICE INDEX

S&P 500 Materials Index(as a ratio of S&P 500 Index)

CRB Raw IndustrialsSpot Price Index*(1967=100)

* Includes copper scrap, lead scrap, steel scrap, tin, zinc, burlap, cotton, print cloth, wool tops, hides, rosin, rubber, and tallow.Source: Standard & Poor’s Corporation and Commodity Research Bureau.

yardeni.com

Figure 19.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 201725

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125

150

175

.1

.2

.3

.4

.5

.6

11/1

11/1

S&P 500 ENERGY & BRENT CRUDE OIL PRICE

S&P 500 Energy Index(as a ratio of S&P 500 Index)

Brent Crude Oil Futures Price*(dollars per barrel)

* Nearby futures price.Source: Standard & Poor’s Corporation and Financial Times.

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Figure 20.




70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 203

18

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63

7893108123138153168

3

18

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63

7893

108123138153168

11/1

WEST TEXAS INTERMEDIATE CRUDE OIL PRICE(dollars per barrel, ratio scale)

* Monthly from 1946 to 1984, then daily.Note: Shaded areas denote recessions according to the National Bureau of Economic Research.Source: Haver Analytics.

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Figure 21.

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 201820

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11/1

11/1

BRENT CRUDE OIL PRICE & INDUSTRIALS COMMODITY PRICE INDEX

CRB Raw IndustrialsSpot Price Index*

Brent Crude OilFutures Price**(dollars per barrel)

* Includes copper scrap, lead scrap, steel scrap, tin, zinc, burlap, cotton, print cloth, wool tops, hides, rosin, rubber, and tallow.** Nearby futures price.

Source: The Commodity Research Bureau and Haver Analytics.

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Figure 22.




91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 193

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10/28

CRUDE OIL: ACTIVE US RIG COUNT & FIELD PRODUCTION

Rig Count(units)

Production(million barrels per day, nsa)

Source: Baker Hughes Inc. and US Department of Energy.

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Figure 23.

87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 1815

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Mar

Mar

CRUDE OIL OUTPUT: OPEC & NON-OPEC (DOE Data)(million barrels per day)

Non-OPEC

Total OPEC

Source: US Department of Energy.

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Figure 24.




70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20100

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S&P GSCI SOYBEANS INDEX(December 31, 1969=100)

Source: Standard & Poor’s Corporation.

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Figure 25.

47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 2120

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SepCONSUMER PRICE INDEX: FOOD(1982-84 = 100, ratio scale)

Source: Bureau of Labor Statistics.

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Figure 26.




68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 2030

330

630

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1230

1530183021302430

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330

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1230

1530183021302430

Nixon Ford Carter Reagan Bush I Clinton Bush II Obama

GOLD PRICE*(dollars per ounce, ratio scale) 11/2

Source: Haver Analytics.* Cash price, London gold bullion, PM Fix. Monthly from 1968 through 1974, then daily.

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Figure 27.

75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19100

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Dec

SepSep

GOLD PRICE* / CPI

Source: US Department of Labor, Bureau of Labor Statistics, Standard & Poor’s, and Haver Analytics.* Cash price. London gold bullion, PM Fix.

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Figure 28.




75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 210

500

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10/28

11/2

GOLD PRICE & FED’S MAJOR TRADE-WEIGHTED DOLLAR INDEX

Fed’s Major Trade-WeightedDollar Index**(March 1973=100)

Gold Price*(dollars per ounce)

* Cash price, London gold bullion, PM Fix.** Index is the weighted average of the foreign exchange rates of the US dollar against the Euro Area, Canada, Japan, United Kingdom, Switzerland,

Australia, and Sweden. The Euro Area includes Germany, France, Italy, Netherlands, Belgium/Luxembourg, Ireland, Spain, Austria, Finland, Portugal, & Greece.Source: Haver Analytics.

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Figure 29.

75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19140

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11/1

GOLD PRICE & INDUSTRIALS COMMODITY PRICE INDEX

Gold Price*(dollars per ounce)

CRB Raw IndustrialsSpot Price Index**(1967=100)

Source: Haver Analytics and Commodity Research Bureau.

* Cash price London gold bullion, PM Fix.** Includes copper scrap, lead scrap, steel scrap, tin, zinc, burlap, cotton, print cloth, wool tops, hides, rosin, rubber, and tallow.

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Figure 30.




2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018225

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D A

11/2

GOLD CASH PRICE(dollars per troy ounce)

Price (1303.75)

200-day moving averageD = On July 26, 2012, ECB President Mario Draghi pledged to do "whatever it takes" to defend the euro.A = On April 4, 2013, Bank of Japan implemented "Abenomics" monetary policy.Source: Haver Analytics.

yardeni.com

Figure 31.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20183.5

3.0

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11/1

GOLD PRICE & 10-YEAR TIPS YIELD

10-Year TIPS Yield(percent, inverted scale) (0.11)

Gold Price*(dollars per ounce) (1303.75)

Source: Board of Governors of the Federal Reserve System.* Cash price. London gold bullion, PM Fix.

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Figure 32.




70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20100

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11/1

S&P GOLDMAN SACHS COMMODITY INDEX(nearby futures price)

Source: Standard & Poor’s and Haver Analytics.

yardeni.com

Figure 33.

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 200

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11/1Oct

S&P GOLDMAN SACHS COMMODITY INDEX & OIL PRICE

Goldman Sachs Commodity Index(nearby futures price)

West Texas Intermediate Crude Oil Price Index(dollars per barrel)

Source: Standard & Poor’s and Haver Analytics.

yardeni.com

Figure 34.




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