Lumber and Copper Prices are Diverging – Which is Signal and Which is Noise?

Bryce Coward writes for Knowledge Blog….

The tale from some of the most cyclical and predictive economic indicators are telling investors two very different things at the moment. Copper, the metal with a PhD in economics is giving us the all-clear sign while lumber, which is perhaps only regarded as having a master’s or bachelor’s in economics, is saying, “be careful.”

Both indicators can’t be right, so which is actually the most useful in telegraphing economic activity? From my perspective, it’s lumber, despite its rather lesser educational attainment. The reasoning is simple. Lumber has a leading relationship with leading indicators of economic activity while copper has a coincident relationship with leading indicators of growth. Yes, you read that right: lumber prices are a leading indicator of a leading indicator, and the data bears it out.

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