Predicting the Markets Chapter 15 Charts: November 2, 216 Dr. Edward Yardeni 516-972-7683 eyardeni@ Mali Quintana 48-664-1333 aquintana@ Please visit our sites at www. blog. thinking outside the box
Table Of Contents Table Of Contents 1-17 November 2, 216 / Chapter 15 Charts: www.
67 57 47 Figure 1. CRB RAW INDUSTRIALS SPOT PRICE INDEX* (1967=, ratio scale) 67 57 47 37 37 27 27 17 17 7 52 54 56 58 6 62 64 66 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18 2 22 7 * 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. Figure 2. CRB RAW INDUSTRIALS SPOT PRICE INDEX* (1967=, daily) C 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 19 2 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. Page 1 / November 2, 216 / Chapter 15 Charts: www.
36 33 Figure 3. CHINA INDUSTRIAL PRODUCTION* (5=, sa) Sep 36 33 27 27 24 24 21 Dec 21 18 18 12 12 9 9 6 6 3 1998 1999 1 2 3 4 5 6 7 8 9 21 211 212 213 214 215 216 217 218 3 * Value added basis. Source: IMF International Financial Statistics. 22 2 Figure 4. CHINA REAL GDP & INDUSTRIAL PRODUCTION (yearly percent change) 22 2 18 18 16 16 14 14 12 12 1 1 8 8 6 Real GDP (6.7) Industrial Production* (6.1) Sep 6 4 4 2 1998 1999 1 2 3 4 5 6 7 8 9 21 211 212 213 214 215 216 217 218 2 * Value added basis. Source: Haver Analytics. Page 2 / November 2, 216 / Chapter 15 Charts: www.
22 2 Figure 5. CHINA INDUSTRIAL PRODUCTION & INDUSTRIALS COMMODITY PRICE INDEX 18 16 14 12 1 8 6 China Industrial Production* (yearly percent change) Sep 4 2 CRB Raw Industrials Spot Price Index** (1967=) 4 5 6 7 8 9 21 211 212 213 214 215 216 217 218 * 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. 22 Figure 6. CHINA INDUSTRIAL PRODUCTION & COPPER PRICE 2 18 16 14 12 1 8 6 China Industrial Production* (yearly percent change) Sep 4 2 Copper Futures Price** (cents per pound) 4 5 6 7 8 9 21 211 212 213 214 215 216 217 218 * Value added basis. ** Nearby futures contract. Source: Haver Analytics. Page 3 / November 2, 216 / Chapter 15 Charts: www.
22 21 2 19 18 17 16 15 14 13 12 11 1 9 8 7 6 5 Figure 7. CHINA REQUIRED RESERVE RATIO (percent) 85 86 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 19 2 Source: People s Bank of China. Required Reserve Ratio Large Depository Institutions (17.) Small/Medium Depository Institutions (15.) 11/4 22 21 2 19 18 17 16 15 14 13 12 11 1 9 8 7 6 5 4 35 Figure 8. CHINA M2 & BANK LOANS (yearly percent change in yuan) 4 35 3 25 M2 (11.5) Bank Loans (13.) 3 25 2 2 15 1 Sep Sep 15 1 5 1 2 3 4 5 6 7 8 9 21 211 212 213 214 215 216 217 218 Source: People s Bank of China. 5 Page 4 / November 2, 216 / Chapter 15 Charts: www.
1 1 Figure 9. BALTIC DRY INDEX (1/4/85=, daily) 1 1 9 9 8 8 1 2 3 4 5 6 7 8 9 21 211 212 213 214 215 216 217 218 Source: The Baltic Exchange. 65 Figure 1. INDUSTRIALS COMMODITY PRICE INDEX & COPPER PRICE 45 55 35 45 CRB Raw Industrials Spot Price Index* (1967=) 11/2 25 35 Copper Futures Price** (cents per pound) 25 5 6 7 8 9 21 211 212 213 214 215 216 217 218 * 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. Page 5 / November 2, 216 / Chapter 15 Charts: www.
225 175 125 Figure 11. BOOM-BUST BAROMETER* (four-week average, ratio scale) 1/22 225 175 125 75 75 5 5 25 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11 13 15 17 19 21 25 * 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. 225 175 Figure 12. BOOM BUST BAROMETER* & BEAR MARKETS IN STOCKS (four-week average, ratio scale) 1/22 225 175 125 125 75 75 5 5 25 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11 13 15 17 19 21 25 * Weekly average of CRB raw industrials spot price index divided by initial unemployment claims, four-week average, showing four-week average. Note: Shaded red areas denote S&P bear market declines of 2% or more. Yellow areas show bull markets. Source: Commodity Research Bureau and US Department of Labor. Page 6 / November 2, 216 / Chapter 15 Charts: www.
19 18 17 16 14 13 12 11 9 8 7 6 5 4 Figure 13. S&P INDEX & YRI BOOM-BUST BAROMETER 1/22 S&P Index YRI Boom-Bust Barometer* 1 2 3 4 5 6 7 8 9 21 211 212 213 214 215 216 217 218 2 18 1 1 1 8 * 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. 19 18 17 16 14 Figure 14. S&P FORWARD EARNINGS & YRI BOOM-BUST BAROMETER (weekly) S&P Forward Earnings* YRI Boom-Bust Barometer** 1/22 1/27 14 13 12 11 13 12 11 9 9 8 8 7 7 6 5 4 1 2 3 4 5 6 7 8 9 21 211 212 213 214 215 216 217 218 6 5 * S&P 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. Page 7 / November 2, 216 / Chapter 15 Charts: www.
25 Figure 15. S&P SECTORS PRICE INDEXES DURING BULL MARKET OF 3-7 (percent change in US dollars) Consumer Discretionary (81.4) Consumer Staples (57.5) Energy (223.2) Finance (83.1) Health Care (43.6) Industrials (124.9) Information Technology (12.) Materials (153.8) Telecommunications Services (112.4) Utilities (138.7) 25 5 5-5 3 4 5 6 7 Source: Standard & Poor s Corporation. -5 38 36 34 32 28 26 24 22 18 16 14 12 8 6 4 2-2 Figure 16. MSCI SHARE PRICE INDEXES DURING BULL MARKET OF 3-7 (percent change in US dollars) Emerging Markets (367.4) EMU (215.4) Japan (123.4) UK (142.3) US (96.7) 3 4 5 6 7 Source: Morgan Stanley Capital International and Standard & Poor s Corporation. 38 36 34 32 28 26 24 22 18 16 14 12 8 6 4 2-2 Page 8 / November 2, 216 / Chapter 15 Charts: www.
Figure 17. EMERGING MARKETS MSCI STOCK PRICE INDEX (in local currencies) & INDUSTRIALS COMMODITY PRICE INDEX Emerging Markets MSCI Stock Price Index (local currencies) CRB Raw Industrials Spot Price Index* 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 * 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. 18 Figure 18. EMERGING MARKETS MSCI CURRENCY INDEX & INDUSTRIALS COMMODITY PRICE INDEX (US$) 1 Emerging Markets MSCI Currency Index* 1 CRB Raw Industrials Spot Price Index** 1 8 1999 1 2 3 4 5 6 7 8 9 21 211 212 213 214 215 216 217 218 * 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. Page 9 / November 2, 216 / Chapter 15 Charts: www.
.22 Figure 19. S&P MATERIALS & INDUSTRIALS COMMODITY PRICE INDEX 65.2.18 55.16 45.14 S&P Materials Index (as a ratio of S&P Index) CRB Raw Industrials Spot Price Index* (1967=) 35.12 5 6 7 8 9 21 211 212 213 214 215 216 217 * 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..6 Figure 2. S&P ENERGY & BRENT CRUDE OIL PRICE 175.5 125.4.3 S&P Energy Index (as a ratio of S&P Index) 75.2 Brent Crude Oil Futures Price* (dollars per barrel) 5.1 5 6 7 8 9 21 211 212 213 214 215 216 217 25 * Nearby futures price. Source: Standard & Poor s Corporation and Financial Times. Page 1 / November 2, 216 / Chapter 15 Charts: www.
168 153 138 123 18 93 78 63 Figure 21. WEST TEXAS INTERMEDIATE CRUDE OIL PRICE (dollars per barrel, ratio scale) 168 153 138 123 18 93 78 63 48 33 48 33 18 18 3 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18 2 3 * Monthly from 1946 to 1984, then daily. Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Source: Haver Analytics. Figure 22. BRENT CRUDE OIL PRICE & INDUSTRIALS COMMODITY PRICE INDEX 16 14 12 8 CRB Raw Industrials Spot Price Index* 6 Brent Crude Oil Futures Price** (dollars per barrel) 4 5 6 7 8 9 21 211 212 213 214 215 216 217 218 2 * 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. Page 11 / November 2, 216 / Chapter 15 Charts: www.
18 Figure 23. CRUDE OIL: ACTIVE US RIG COUNT & FIELD PRODUCTION 1 1 1 Rig Count (units) 1/28 9 1 Production (million barrels per day, nsa) 8 7 8 6 1/28 5 4 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 19 Source: Baker Hughes Inc. and US Department of Energy. 3 65 55 Figure 24. CRUDE OIL OUTPUT: OPEC & NON-OPEC (DOE Data) (million barrels per day) Non-OPEC Mar 65 55 45 45 35 Total OPEC Mar 35 25 25 15 87 88 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 Source: US Department of Energy. 15 Page 12 / November 2, 216 / Chapter 15 Charts: www.
8 75 65 55 45 Figure 25. S&P GSCI SOYBEANS INDEX (December 31, 1969=) 8 75 65 55 45 35 25 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18 2 Source: Standard & Poor s Corporation. 35 25 26 22 Figure 26. CONSUMER PRICE INDEX: FOOD (1982-84 =, ratio scale) Sep 26 22 18 18 14 14 6 6 2 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 1 3 5 7 9 11 13 15 17 19 21 2 Source: Bureau of Labor Statistics. Page 13 / November 2, 216 / Chapter 15 Charts: www.
243 213 183 153 123 Figure 27. Nixon Ford Carter Reagan Bush I Clinton Bush II Obama GOLD PRICE* (dollars per ounce, ratio scale) 243 213 183 153 123 93 93 63 63 33 33 3 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18 2 3 * Cash price, London gold bullion, PM Fix. Monthly from 1968 through 1974, then daily. Source: Haver Analytics. 95 9 85 8 75 65 55 45 35 25 Figure 28. GOLD PRICE* / CPI 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11 13 15 17 19 Dec Sep 95 9 85 8 75 65 55 45 35 25 * Cash price. London gold bullion, PM Fix. Source: US Department of Labor, Bureau of Labor Statistics, Standard & Poor s, and Haver Analytics. Page 14 / November 2, 216 / Chapter 15 Charts: www.
16 Figure 29. GOLD PRICE & FED S MAJOR TRADE-WEIGHTED DOLLAR INDEX 14 12 Gold Price* (dollars per ounce) Fed s Major Trade-Weighted Dollar Index** (March 1973=) 1 1/28 8 6 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11 13 15 17 19 21 * 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. 19 18 1 1 1 1 1 1 1 9 8 Figure 3. GOLD PRICE & INDUSTRIALS COMMODITY PRICE INDEX Gold Price* (dollars per ounce) CRB Raw Industrials Spot Price Index** (1967=) 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11 13 15 17 19 66 62 58 54 46 42 38 34 26 22 18 14 * 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. Source: Haver Analytics and Commodity Research Bureau. Page 15 / November 2, 216 / Chapter 15 Charts: www.
1975 18 Figure 31. GOLD CASH PRICE (dollars per troy ounce) D A 1975 18 1625 1625 145 Price (1288.45) 145 1275 1275 1 1 925 925 75 75 575 575 225 19 18 1 1 1 1 1 1 1 9 8 2 3 4 5 6 7 8 9 21 211 212 213 214 215 216 217 218 -day moving average D = On July 26, 212, ECB President Mario Draghi pledged to do "whatever it takes" to defend the euro. A = On April 4, 213, Bank of Japan implemented "Abenomics" monetary policy. Source: Haver Analytics. Figure 32. GOLD PRICE & 1-YEAR TIPS YIELD Gold Price* (dollars per ounce) (1288.45) 1-Year TIPS Yield (percent, inverted scale) (.11) 6 7 8 9 21 211 212 213 214 215 216 217 218 225-1.5-1. -.5..5 1. 1.5 2. 2.5 3. 3.5 * Cash price. London gold bullion, PM Fix. Source: Board of Governors of the Federal Reserve System. Page 16 / November 2, 216 / Chapter 15 Charts: www.
9 Figure 33. S&P GOLDMAN SACHS COMMODITY INDEX (nearby futures price) 9 8 8 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18 2 Source: Standard & Poor s and Haver Analytics. Figure 34. S&P GOLDMAN SACHS COMMODITY INDEX & OIL PRICE 8 Goldman Sachs Commodity Index (nearby futures price) West Texas Intermediate Crude Oil Price Index (dollars per barrel) Oct 5 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18 2 Source: Standard & Poor s and Haver Analytics. Page 17 / November 2, 216 / Chapter 15 Charts: www.
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