Paging Dr. Copper

By Michael Salvatore

The new shiny metal at the top of your watchlist… And why it should make you super bullish on the global economy… Breaking the inflation beat streak… High-quality, cheap, uptrending stocks are a winning formula… Jason Bodner’s newest Quantum Edge Hotlist… Our editor-in-chief, Luis Hernandez, in conversation with a data dream team… The $13 trillion industry that AI is set to disrupt next…

Meet your new favorite industrial metal…

Copper has seen a surge in price over the past few months. From a price of about $2.80 per ounce at the start of the year, copper is now trading over $5. Gold is yesterday’s news compared to copper. It’s also keeping pace with the other high-flying precious metal, silver:

Commodities have all been surging lately, whether it’s metals like these, fuel commodities like oil, even soft commodities like coffee, cocoa, and orange juice.

The reasons vary, but the broader trend is clear: we’re seeing a commodities supercycle before our eyes.

In the aftermath of the Federal Reserve’s wicked 2020 liquidity injection into the financial system and the reopening of the world, demand for goods has skyrocketed along with their prices. That’s ignited a bull market in the raw materials that go into everything from semiconductors to the new apartment building springing up downtown.

But let’s focus on copper here, because there’s historical evidence that a boom in copper prices bodes well for the economy.

Copper has all kinds of practical applications, from electronics to power generators and transmitters to building materials. The latter category represents the biggest use, with the Copper Development Association estimating that 46% of global copper usage is committed to construction.

Higher copper demand, therefore, usually translates to more productivity and greater economic output. Because of this, economists will refer to copper as “Dr. Copper” for its strong track record for “diagnosing” the global economy.

Going by the recent surge in copper prices, we have reason to be optimistic.

For now, we should take copper’s price rise as an overall positive on the global economy. Demand for the materials that make hold-in-your-hand goods is rising fast. That’s a good sign.

And it’s far from the only one…

❖ Inflation broke its beat-streak last week…

For the first time this year, inflation advanced at a slower rate than forecast. The monthly Consumer Price Index rose 0.3% from March to April, and “core” CPI – which excludes food and energy prices – was right in line with consensus estimates at 0.3%.

The annual gain in CPI was 3.6%, the smallest rise since inflation started to pick up in the first half of 2021 (what you might remember as the “transitory” era).

But is that enough to give the Federal Reserve (and investors) enough assurance that long-awaited rate cuts are coming? Seemingly, yes.

Let’s first look at stocks. The Dow Jones Industrial Average cleared 40k for the first time last week. The S&P 500 and Nasdaq both set new highs, too. That’s a big vote of confidence that the correction we saw in April was not the start of something worse.

Then take Fed Chair Jerome Powell’s comments last week.

Powell said he thinks it’s unlikely the next move from the Fed will be a rate hike based on the data he’s seeing. We were ahead of this one – the massive issuance of corporate debt was a sign to us that demand is at a fever pitch precisely because investors don’t expect higher rates from here.

Finally, let’s look at the CBOE’s FedWatch tool. We can see that there’s now a comfortable consensus that the Fed will cut rates at the September meeting, after expectations that the Fed will hold rates steady at that time have dropped over the last week:

All this – plus the moves in copper – combines to form a refreshingly simple takeaway: be bullish on stocks, bonds, and the global economy.

You want to buy high-quality, cheap, uptrending businesses participating in the most powerful trends. Stocks like the ones in our Trinity screener.

This screener is currently only available to TradeSmith Platinum members, but I like to share it here from time to time. Here’s the current Trinity list, sorted by Business Quality Score (BQS):

(Disclosure, I own shares of BBW.)

Trinity stocks are a rare breed. They’re stocks with a P/E ratio cheaper than the broad market, a Business Quality Score in the tippy-top of the ranking list, and in an uptrend.

This well-diversified group of factors highlight quality businesses in multiple sectors. Above you can see high-quality stocks in consumer discretionary, energy, financials, and more.

And that’s far from the only place to find high-quality stocks…

We’ve been in the habit of sharing Jason Bodner’s Quantum Edge hotlist with you…

Because it’s a great place to find stocks with a different buy signal backing them up.

Regular readers know Jason’s entire approach revolves around the big institutional capital that makes waves in the stock market. After running one of Wall Street’s biggest institutional trading desks earlier in his career, he learned to spot the signs of a billion-dollar bankroll discreetly changing hands.

He compiles those signals, alongside each stock’s fundamental growth picture, into a weekly ranking for his subscribers. Here’s last week’s list:

Like with last week, we’re seeing the top-ranked stocks spread out from the energy-dominant picture we saw before. We’re seeing strong institutional support in big tech, utilities, oil & gas, communications, and more.

While the last list of bottom-ranked stocks we shared was concentrated in health care names, this week shows similar diversity. We’re seeing sell signals in biopharmaceuticals, mining, and semiconductor manufacturing.

TradeSmith Editor-in-Chief Luis Hernandez recently caught up with Andy Swan…

Regular readers should be familiar with Andy Swan and his brother Landon. They’re the co-founders of LikeFolio and editors of Derby City Daily, and they have a unique method of trading the market.

Plenty of investors use fundamental and technical metrics to make investment decisions. People have their own style, and weight the different factors their own way, but ultimately there’s little new under the sun. And since traders can quickly share new information on the internet, any new techniques to trade – and the edge traders get from them – is short-lived.

Andy and Landon’s readers don’t have this problem. Because they use a wholly unique social-media-scanning algorithm that delivers a valuable piece of info most don’t have – how a company’s consumers feel about their products.

If you think this piece of data doesn’t have an edge, you’d be wrong. Andy and Landon have used this data time and again to put their readers well ahead of major trends. Tesla, Bitcoin, Coinbase, and other under-the-radar names like On Running and Duolingo are just a handful of the big profitable ideas they’ve shared.

The 11 herbs and spices, so to speak, that go into their algorithm are closely guarded. But TradeSmith’s editor-in-chief, Luis Hernandez, recently caught up with Andy Swan at our studio for an impromptu interview. They discussed a few recent recommendations and their results, along with some emerging trends he’s seeing in their data. Watch below for Andy’s outlook for the rest of 2024:

Watch Now:

 

To hear more from Andy and Landon, head on over to Derby City Daily and sign up for their free e-letter. You’ll get plenty of ideas in your inbox throughout the week that showcase how powerful their system is. 

To your health and wealth,

Michael Salvatore
Editor, TradeSmith Daily