Market Correlations: Trade-Weighted Dollar March 11, 218 Dr. Edward Yardeni 516-972-7683 eyardeni@ Joe Abbott 732-497-536 jabbott@ Mali Quintana 48-664-1333 aquintana@ Please visit our sites at www. blog. thinking outside the box
Table Of Contents Table Of Contents TWD & Commodities 1 TWD & EM MSCI 2 TWD & Inflation 3 TWD & Profits 4 TWD & Expected Inflation 5 Gold, Crude Oil, & Trade-Weighted Dollar 6 March 11, 218 / Market Correlations: Trade-Weighted Dollar www.
TWD & Commodities 8 Figure 1. INDUSTRIALS COMMODITY PRICE INDEX & TRADE-WEIGHTED DOLLAR 7 85 9 6 CRB Raw Industrials Spot Price Index* (1967=1) 1 15 * 5 11 4 12 3 13 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 19 2 2 * Includes copper scrap, lead scrap, steel scrap, tin, zinc, burlap, cotton, print cloth, wool tops, hides, rosin, rubber, and tallow. * Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: Commodity Research Bureau and JP Morgan. 85 9 Figure 2. BRENT CRUDE OIL PRICE & TRADE-WEIGHTED DOLLAR 16 15 14 13 12 1 11 15 1 9 11 8 12 Brent Crude Oil Futures Price* (dollars per barrel) 7 6 5 13 * 25 26 27 28 29 21 211 212 213 214 215 216 217 218 219 22 4 3 2 * Nearby futures price. * Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: JP Morgan and Haver Analytics. Page 1 / March 11, 218 / Market Correlations: Trade-Weighted Dollar www.
85 9 Figure 3. TWD & EM MSCI EMERGING MARKETS MSCI STOCK PRICE INDEX & TRADE-WEIGHTED DOLLAR 15 1 1 15 11 Emerging Markets MSCI Stock Price Index (in dollars) 5 12 13 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 218 85 9 Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: JP Morgan and Morgan Stanley Capital International. Figure 4. EMERGING MARKETS MSCI STOCK PRICE INDEX & TRADE-WEIGHTED DOLLAR 7 6 5 1 15 4 11 12 Emerging Markets MSCI Stock Price Index (in local currencies) 3 2 1 13 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 218 219 Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: JP Morgan and Morgan Stanley Capital International. Page 2 / March 11, 218 / Market Correlations: Trade-Weighted Dollar www.
4. Figure 5. INFLATION & TRADE-WEIGHTED DOLLAR TWD & Inflation 7 3.5 3. 2.5 2. PCED: Total Ex Food & Energy (yearly percent change) 8 9 1 1.5 1. Jan 11.5 12. 94 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 13 75 8 85 9 1 Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: US Department of Commerce, Bureau of Economic Analysis and JP Morgan. Figure 6. US IMPORT PRICES & TRADE-WEIGHTED DOLLAR (113.9) Import Price Index: Nonpetroleum Imports (yearly percent change) (1.9) 15 1 5 15 11 12 Jan -5 13 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 218 219-1 Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: Bureau of Labor Statistics and JP Morgan. Page 3 / March 11, 218 / Market Correlations: Trade-Weighted Dollar www.
-16-14 -12-1 -8-6 -4-2 2 4 6 8 1 12 14 16 18 2 Figure 7. S&P 5 REVENUES PER SHARE & US TRADE-WEIGHTED DOLLAR (yearly percent change) Broad Effective Exchange Rate (-7.7) TWD & Profits S&P 5 Revenues (using dollars per share) (9.4) 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 19 2 15 1 5-5 -1-15 -2-25 -4-3 * Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: JP Morgan and Standard & Poor s. Figure 8. S&P 5 FORWARD EARNINGS & US TRADE-WEIGHTED DOLLAR (yearly percent change) 6 45-2 3-1 15 1-15 2-3 3 4 5 (-7.7) S&P 5 Forward Earnings** (2.1) 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 19-45 -6-75 Ukraine, Uruguay, Venezuela, Vietnam, and United States. ** Time-weighted average of consensus estimates for current and next year. Source: Thomson Reuters I/B/E/S and JP Morgan. Page 4 / March 11, 218 / Market Correlations: Trade-Weighted Dollar www.
8 9 1 11 12 13 Figure 9. TRADE-WEIGHTED DOLLAR & EXPECTED INFLATION TWD & Expected Inflation * Expected Inflation in 1-Year TIPS* 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 218 3.4 3.2 3. 2.8 2.6 2.4 2.2 2. 1.8 1.6 1.4 1.2 1..8.6.4.2. * Yield spread between 1-year US Treasury bond and comparable TIPS. * Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: Commodity Research Bureau and JP Morgan. Page 5 / March 11, 218 / Market Correlations: Trade-Weighted Dollar www.
15 Figure 1. Gold, Crude Oil, & Trade-Weighted Dollar GOLD PRICE & WEST TEXAS INTERMEDIATE CRUDE OIL PRICE 2 Gold Price* (dollars per ounce) 15 1 West Texas Intermediate Crude Oil Price (dollars per barrel) 1 5 5 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18 2 * Cash price. London gold bullion, PM Fix. Source: Haver Analytics. 2 Figure 11. GOLD PRICE & FED S TRADE-WEIGHTED DOLLAR INDEX 16 15 Gold Price* (dollars per ounce) 14 Fed s Major Trade-Weighted Dollar Index** (March 1973=1) 12 1 1 5 3/2 8 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 1 12 14 16 18 2 6 * 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. Page 6 / March 11, 218 / Market Correlations: Trade-Weighted Dollar www.
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