[Our chart] shows

gold prices

shifted forward by 19.8 months, and compared with

crude oil prices.

The shift is done to better portray how gold’s price movements get echoed after that length of time in the movements of oil prices.

This isn’t a perfect model, just a really good one. Occasionally, it gets out of whack, most recently when Russia invaded Ukraine and disrupted the oil market. But after every episode of the correlation getting weird, prices work extra-hard to get back on track again.

Coming up, this model says we have a bottom in oil due in mid-2024, followed by a rise toward the end of the year. That oil price rise isn’t going to be good news for any federal politicians who may be running for re-election in November. And if the recent rally in gold prices keeps going higher, that is going to mean higher oil prices 19.8 months later.

Tom McClellan

Overseas Stocks on a Roll

The Weekly Speculator

Marketfield Asset Management
May 9: Outside of the U.S., we continue to see signs of recovery. The

FTSE 100

index has recorded a series of all-time highs, and now sports a year-to-date return of 8.03% that is close to the

S&P 500

index, at 8.76%, at least in local terms, while [Germany’s]

DAX

index recorded a new high this morning. Thus, although the U.S. equity market still dominates exposure and attention, it no longer looks like the only game in town.

In Asian markets, the remarkable advance in Japan has stalled, with the

Nikkei 225

consolidating around the 38,000 level. It appears that the sudden improvement in Chinese markets has led to some capital being diverted from large Japanese overweight positions toward the Chinese market. We pointed out a few weeks ago the highly unusual breakdown in the relationship between these two markets, and there is certainly some room for mean reversion. However, below 38,000, the Nikkei still looks buyable to us, even if it may take several weeks for the outflow of hot money to be completed.

As for China, this market reminds us of the U.S. in the early years of recovery from the 2008-09 financial crisis. The many problems facing the economy were obvious, but the solutions much less so (arguably they were mostly bypassed rather than fixed). We doubt that China stands at the dawn of the sort of explosive bull market that the U.S. has enjoyed over the past 15 years, but it still seems that some decent performance could take place over the remainder of 2024, and that this is likely to spill over into greater enthusiasm for China proxies within the commodity and equity markets.

Michael Shaoul, Timothy Brackett

Good News for Job Market

Quick Takes

Yardeni Research
May 9: S&P 500 forward earnings per share is an excellent coincident indicator of nonfarm payroll employment in private industry. That makes sense, since profitable companies hire while unprofitable ones fire. Forward earnings rose to a record high during April, consistent with a solid labor market. So, we don’t buy the claim that the latest jobless claims is just the beginning of a significant downturn in the labor market and the economy.

Ed Yardeni

April CPI: Sunnier Forecast

Special Commentary

Wells Fargo
May 8: A string of uncomfortably hot inflation readings in the first quarter leaves a narrow window for inflation to downshift since a late-summer rate cut by the Federal Open Market Committee, or FOMC, is no longer on the table. We expect the April CPI report to demonstrate that while inflation isn’t as sticky as the first-quarter pace indicated, the journey back to 2% remains slow going.

Headline CPI likely rose by 0.4% for a third consecutive month in April, which would leave overall prices running at nearly a 5% three-month annualized rate. Progress in lowering core inflation, however, likely resumed. Excluding food and energy, we estimate prices rose 0.3%, which would break the streak of 0.4% gains since January and push the year-over-year rate down to 3.6%, a three-year low. Ongoing deflation in the goods sector is expected to help keep a lid on core inflation in April, but services are likely to be the bigger driver of the softer print. We look for shelter inflation to have eased a bit further in April, and we anticipate a bigger step down in core services ex-housing (+0.4% after a 0.6% rise in March).

While inflation has been stubborn in recent months, we don’t believe the underlying trend is re-accelerating. Supply-chain pressures aren’t easing as rapidly as a year or two ago, but they aren’t building, either. Shelter inflation looks set to moderate further this year, while services ex-housing inflation should benefit from tamer growth in goods-related input costs and gradual loosening in the labor market. We expect to see monthly inflation prints trend lower over the remainder of the year as a result, with the core CPI subsiding to a 2.8% annualized rate in the fourth quarter and the core PCE easing to a 2.1% annualized rate in the fourth quarter.

Sarah House, Aubrey George

Hang On to Uranium

Weekly Update

The Aden Forecast
May 2: Copper is strong as it gets closer to its all-time high, and copper shares are doing great. Copper will remain very strong above $4.20. Weakness in steel has affected

Cleveland-Cliffs

and

Nucor
,

but they remain a good buy. Crude oil is slipping in a downward correction. It’s vulnerable below $84 a barrel, and it has some support at $79. Uranium looks like the correction is about over, and the shares have been forming a bottom area. Keep your positions.

Pam Aden, Mary Anne Aden

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