Tags: Hyman | economy | bottom | mini boom

The Global Economy Has Bottomed

By Sean Hyman   |   Monday, 01 Oct 2012 07:38 AM

The global economy hit a bottom for now and turned a corner in the June-September period and has been mildly heading higher ever since.

How do I know? I like to track things in real time because most fundamental data will lag for months. So, you really won’t know by going this “traditional route” until well after the fact.

But, like I said, I like to track things in real time. So, I look to assets that get a lift when the global economy begins to mend.

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For instance, one of the most widely watched and used commodities in the world is oil. When oil is trending lower, much of the time, that’s due to a slowing global economy. But when oil bottoms and trends higher, that’s typically due to more demand being put on the limited supplies of oil by the global economy.

So, when did oil bottom? Both West Texas Intermediate Crude and Brent Crude bottomed in late June, and oil has been heading higher overall ever since.

That’s one sign that the global economy is on the mend, but there are more signs. Like copper.

Copper is another widely used commodity. It’s used in office buildings, residential real estate, cars, electronics, etc. When copper is heading lower, manufacturers and builders have no need to stock up on the metal, so copper ends up declining in price. But when the demand comes back, it puts a floor under the price of copper and causes it to rebound into a new uptrend.

So, when did copper bottom out? Its ultimate “spike low” happened in early June, but it went sideways all the way through June, July and August. In fact, it wasn’t until late August that it really got its legs and took off to the upside. Therefore, copper is showing a pickup in global demand too.

Steel is another widely used commodity. It’s widely used in infrastructure, among other things, so I also watch it to see what it’s doing. The end result? It bottomed in early June, but then went sideways all the way through August and just got its legs to the upside in early September.

Coal is a widely used energy source. And so far, it looks like it bottomed out in early September.

In addition, industrial metals like silver, platinum and palladium all bottomed in the July-August period.

So, you can see there’s a theme here. Broad-based global demand picked up for all of these widely used commodities in the June-September period. Some of them caught fire earlier on, while others did so later on in this period. But each and every one of these widely used commodities began to bottom and perk up during this period.

Therefore, I believe that we’ve seen a bottom in the global economy for now.

I don’t believe we’re going to see a raging recovery. Instead, I believe we’ll see some “mini booms” and “mini busts” throughout the next four to seven years.

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But I do feel that one of those “mini busts” has now ended and the beginning of the next “mini boom” has begun.

I believe commodities, commodity-related stocks and many foreign currencies will benefit the most in the months ahead as a result.

What will take it on the chin the most? Defensive assets like the U.S. dollar and Japanese yen.

So, make sure you’re in on this next “mini boom.” It won’t be a raging bull market, but nonetheless, you’re going to want to catch every upswing in the economy that’s coming.

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Ultimate Wealth Report. Discover more by Clicking Here Now.

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