Analysts keep reminding us everything is ok, the economy will be strong in the second half, the labor market is sound, and the Fed will start raising rates in September.
Now let's look at the above chart. The red line shows the growth of producer prices for commodities and the blue line shows producer prices for finished goods. The first one tumbled -8.5% y/y and the second one sank -4.2% y/y.
This kind of worrisome declines happen for only one reason - the economy is very weak. In a strong economy prices rise. In a weak economy prices decline. No question about it.
These trends have important investment implications for commodity-sensitive asset classes and interest rate-sensitive investments.
You will find more details on how these ideas apply to portfolio management in The Peter Dag Portfolio on www.peterdag.com
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977 Author, Profiting in Bull and Bear Markets
No. 1 bond timer in the past 12 months.
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