Two charts illustrate how to “follow the money”

Too often investors get caught up in their political allegiance or parties, focus on the negative and lose confidence in stocks. As a result, they can miss great bull markets. I believe when it comes to finding investment opportunities, it’s not about the political party, it’s about the policies, both monetary and fiscal.

This was a main theme of mine when I was speaking at the Agora Financial Investment Symposium, and throughout my presentations, I encouraged investors to follow the money. With that in mind, here are two of my favorite charts that I believe demonstrate how investors can do exactly that.

1. Global Manufacturing Activity

Manufacturing data among numerous countries has recently been moving in the right direction. For the month of July, the JPMorgan Global Manufacturing Purchasing Manager’s Index (PMI) stayed above the three-month moving average for the second month in a row. Global output continues to expand, rising to 50.8 from 50.6 in June.

 

To us, the PMI is not only a gauge of economic well-being for the manufacturing sector. Last month, after the PMI initially crossed the three-month reading in June, I explained that this “crossover” has historically signaled higher prices for many commodities. Here are the details, using the SPDR S&P Metals & Mining ETF (XME) as an example. Since the beginning of 2009, history suggests that one month after the crossover, 60% of the time, the XME has gained an average of 7.4%.

Consistent with its historical pattern, in July, the XME rose 7.6%.

There may still be room for these stocks to grow, too, as the next two months look promising for metals and mining companies. If you look at the three-month average after the “crossover,” 80% of the time, the XME gained 12.6%.

Page 1 of 2 >>
Comments
comments powered by Disqus