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Investment Trends: Follow the Trend to Profits
Pinnacle Digest writes: Manufacturing weakened around the world in June, according to the JP Morgan Global Manufacturing Purchasing Managers Index. This Index is well known as the PMI. It came in at 48.9, the lowest in three years and the first dip below 50 (which signals recession or contraction) since September 2011.
Although this is a very negative indicator for the global economy at the moment, it comes with some very good news for commodities. In the following three months after the PMI crosses above the three month moving average, which it did in April, copper has risen 10%, 90% of the time. Crude oil has risen 11%, 85% of the time. Although the PMI is down now, history indicates it will bounce back quickly, which is bullish for commodities.
Holmes reminds us to use history as a guide. Statistically we should see strength in commodities by the end of July. Like many heavily weighted to the materials sector, Frank, and his team at US Global Investors, believe central banks are closely monitoring economic activity and will be quick to act should it be deemed necessary. Frank uses graphs to better illustrate the rise in commodity prices following an uptrend in the PMI.
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