Market Briefing: Key Macro Correlations Yardeni Research, Inc.

January 20, 2017

Dr. Edward Yardeni 516-972-7683 [email protected]

Joe Abbott 732-497-5306 [email protected]

Mali Quintana 480-664-1333 [email protected]

Please visit our sites at www.yardeni.com blog.yardeni.com

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Table Of Contents

Table Of Contents

Trade-Weighted Dollar & Commodities Dollar & Stocks Commodity Prices & Stocks S&P 500 Sectors & Commodities Commodities Misc

January 20, 2017 / Market Briefing: Key Macro Correlations

3 4 5 6 7 8-10

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Trade-Weighted Dollar & Commodities Figure 1. 80

700

INDUSTRIALS COMMODITY PRICE INDEX & TRADE-WEIGHTED DOLLAR

85 600

90

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

95 100

1/19

JP Morgan Nominal Broad Effective Exchange Rate** (inverted scale)

105

500

400

110 115

300

120 1/20

125 130

yardeni.com 95

96

97

200 98

99

00

01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

19

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

Figure 2. 85

160

BRENT CRUDE OIL PRICE & TRADE-WEIGHTED DOLLAR

150 90 140 130

95

120 100

110 100

105

90 110

80 70

115

Brent Crude Oil Futures Price* (dollars per barrel)

120

50

JP Morgan Nominal Broad Effective Exchange Rate** (inverted scale)

125

130

60

40

1/20

30

yardeni.com 2005

2006

20 2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

* Nearby futures price. ** 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 Haver Analytics.

Page 3 / January 20, 2017 / Market Briefing: Key Macro Correlations

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Dollar & Stocks Figure 3. 130

7.0

RELATIVE PERFORMANCE OF US MSCI & TRADE-WEIGHTED DOLLAR (daily)

1/20 1/19

6.5

120

6.0

5.5 110 5.0

4.5 100

90

80

US MSCI (in US$) Divided by All Country World ex US MSCI (in local currencies)

4.0

JP Morgan Nominal Broad Effective Exchange Rate*

3.0

3.5

yardeni.com 95

96

97

2.5 98

99

00

01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

* 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: Morgan Stanley Capital International and JP Morgan.

Figure 4. 85

60000

EMERGING MARKETS MSCI STOCK PRICE INDEX & TRADE-WEIGHTED DOLLAR

90 50000

1/19 95

100

40000

105

110

115

Emerging Markets MSCI Stock Price Index (in local currencies)

30000

JP Morgan Nominal Broad Effective Exchange Rate* (inverted scale)

20000

120 10000 1/20

125

130

yardeni.com 2001

2002

0 2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

* 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 Morgan Stanley Capital International.

Page 4 / January 20, 2017 / Market Briefing: Key Macro Correlations

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Commodity Prices & Stocks Figure 5. 700

1500

EMERGING MARKETS MSCI STOCK PRICE INDEX (in dollars) & INDUSTRIALS COMMODITY PRICE INDEX Emerging Markets MSCI Stock Price Index (in dollars)

600

1000

CRB Raw Industrials Spot Price Index*

500

1/19

400 500

300

yardeni.com

200 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

0

20

* 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.

Figure 6. 90

700

CHINA MSCI & INDUSTRIALS COMMODITY PRICE INDEX

85 80 75

600

70 65 1/19

60

500

55 50

China MSCI Share Price Index (in dollars)

45 40

400

CRB Raw Industrials Spot Index (1967=100)

35

yardeni.com

30 2009

2010

2011

2012

2013

2014

2015

2016

2017

300

2018

Source: Morgan Stanley Capital International and Commodity Research Bureau.

Page 5 / January 20, 2017 / Market Briefing: Key Macro Correlations

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S&P 500 Sectors & Commodities Figure 7. .6

175

S&P 500 ENERGY & BRENT CRUDE OIL PRICE

150 .5

125 .4 100 .3

S&P 500 Energy Index (as a ratio of S&P 500 Index) .2

.1

75 1/19 1/19

Brent Crude Oil Futures Price* (dollars per barrel)

50

yardeni.com 2005

2006

25 2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

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

Figure 8. .22

700

S&P 500 MATERIALS & INDUSTRIALS COMMODITY PRICE INDEX

650 .20 600

550

.18 1/19

500

.16

450

S&P 500 Materials Index (as a ratio of S&P 500 Index) .14

.12

400 1/19

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

350

yardeni.com 2005

2006

300 2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

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

Page 6 / January 20, 2017 / Market Briefing: Key Macro Correlations

Yardeni Research, Inc. www.yardeni.com

Commodities Figure 9. 700

500

INDUSTRIALS COMMODITY PRICE INDEX & COPPER FUTURES PRICE

650

600

400

550

1/19

500

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

450

400

300

1/19

200

Copper Futures Price** (cents per pound)

350 yardeni.com

300 2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

100

2018

* 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.

Figure 10. 2000 1900

660

GOLD PRICE & INDUSTRIALS COMMODITY PRICE INDEX

620

1800

Gold Price* (dollars per ounce)

1700 1600

580 540

1500

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

1400 1300

500 460

1/20

1200 1100

420

1000 900

380

800

340

700 300

600 500

260

400 220

300 200 100 0

180 yardeni.com 75

77

79

140 81

83

85

87

89

91

93

95

97

99

01

03

05

07

09

11

13

15

17

19

21

* 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 7 / January 20, 2017 / Market Briefing: Key Macro Correlations

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Misc Figure 11. 3.4 3.2

700

INDUSTRIALS COMMODITY PRICE INDEX & EXPECTED INFLATION

3.0 2.8

600

2.6 2.4 2.2 1/19

2.0

500

1.8 1.6

Expected Inflation in 10-Year TIPS*

1.4

400

1.2

CRB Raw Industrials Index

1.0 .8

300

.6 .4 .2 .0

yardeni.com 2003

2004

200 2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

* Yield spread between 10-year US Treasury bond and comparable TIPS. Source: Federal Reserve Board, US Treasury, and Bureau of Economic Analysis.

Figure 12. 80

3.4

TRADE-WEIGHTED DOLLAR & EXPECTED INFLATION

3.2 3.0 2.8

90

2.6 2.4 2.2 1/19

100

2.0 1.8 1.6 1.4

110

1.2

JP Morgan Nominal Broad Effective Exchange Rate** (inverted scale)

1.0 .8

120

Expected Inflation in 10-Year TIPS*

.6 .4

1/20

.2 130

yardeni.com 2003

2004

.0 2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

* Yield spread between 10-year US Treasury bond and comparable TIPS. ** 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: Commodity Research Bureau and JP Morgan.

Page 8 / January 20, 2017 / Market Briefing: Key Macro Correlations

Yardeni Research, Inc. www.yardeni.com

Misc Figure 13. 2.5

150

S&P 500 ENERGY/TRANSPORATION & CRUDE OIL PRICE

Energy Index /Transportation Index

2.0

100

Brent Crude Oil Futures Price* (dollars per barrel) 1.5

50 1.0 1/19

yardeni.com

.5 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

0

20

* Spot price through yearend 2014, then nearby futures price. Source: Standard & Poor’s and Financial Times.

Figure 14. 85

60000

EMERGING MARKETS MSCI STOCK PRICE INDEX & TRADE-WEIGHTED DOLLAR

90 50000

1/19 95

100

40000

105 30000 110

Emerging Markets MSCI Stock Price Index (local currency)

115

20000

120

JP Morgan Nominal Broad Effective Exchange Rate* (inverted scale)

125

10000 1/20 yardeni.com

130 2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

0

2018

* 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 Morgan Stanley Capital International.

Page 9 / January 20, 2017 / Market Briefing: Key Macro Correlations

Yardeni Research, Inc. www.yardeni.com

Misc Figure 15. 700

60000

EMERGING MARKETS MSCI STOCK PRICE INDEX (in local currencies) & INDUSTRIALS COMMODITY PRICE INDEX Emerging Markets MSCI Stock Price Index (local currencies)

600

40000

CRB Raw Industrials Spot Price Index*

500

50000

1/19

1/19 30000

400 20000

300 10000

yardeni.com

200 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

0

20

* 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 10 / January 20, 2017 / Market Briefing: Key Macro Correlations

Yardeni Research, Inc. www.yardeni.com

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