Annualised performance data in euros at 31st August 2023

‘Doctor Copper’, the industrial metal with a PhD in economics, is so named, as this widely used industrial commodity is highly correlated with the business cycle. Copper tends to rally during periods of economic strength and then decline during times of economic weakness. When measured versus gold, the monetary metal, the copper/gold ratio provides a good barometer of the health of the global economy. Rallies in the ratio coincide with periods of economic growth and/or rising inflation. Declines coincide with periods of economic weakness and/or falling inflation.

After the post-covid surge in 2020 and 2021, the copper/gold ratio declined in 2022 as the global economy weakened and inflation fell. In 2023, the ratio has stabilised. We are watching closely to see what the good doctor will prescribe for the remainder of this year and into 2024.

We will end this report with some final thoughts on the energy sector. At the time of writing our July update, crude oil prices were trading at approximately $70/barrel. Today, Brent crude oil prices are trading at $95/barrel and those poor US Treasury bond holders continue to suffer. The global economy (ex-China) remains resilient, energy demand remains robust and inflation, while falling, is still too high. The current market remains a positive one for equity, energy, and commodity investors and a challenging one for those focused on fixed income.