There is a growing divergence between developed market equities and commodities. The equity-commodity correlation has moved from above .8 to below .5. However, at the same time there has been a slight increase in correlation with emerging markets.
The link between commodities and emerging markets is both on the supply and demand side of the equation. In the case of China, slower growth has reduced the demand for many base metals. A positive correlation between slower growth and declining prices. Similarly, the suppliers of raw materials to China such as Brazil have seen the impact on their exports. Brazil and other commodity suppliers have seen a growth decline. The result has been a common factor of growth affecting both markets and decoupling with those equity markets which are less raw material driven.
No comments:
Post a Comment