Commodities and Technology Stocks: Macros Matter

Ed Mertiri |

TV Interviews with Erin Gibbs

Commodity Decline and the 10 Year Yield

Fox Business News

 

Last week we described the decline in commodity prices, and their further expected declines from futures prices. This week we want to highlight the inverse correlation between technology stocks and commodities. While it may not be obvious from a business perspective, raw material prices and technology stocks are highly negatively correlated. The chart above shows indices of the two asset classes have trended in opposite directions for the last year. The early June peak in the S&P GSCI Index (mostly led by oil but quickly followed by almost every material in the index) indicated that there could be a break in the Technology sector’s 2022 steady decline.

The upturn in the Information Technology Sector, that started mid-June, has not been as dramatic in magnitude as the commodity decline but we still see both reversal trends staying in place for at least the next week.

Despite the backdrop of a busy two weeks of earnings reports, including many technology companies, we see the macro environment favorable enough to push technology ahead even if earnings guidance is more cautious than expected. I am not saying the 2022 bear market is over or the Value’s dominance over Growth is done just yet, but it looks to be on pause for the next week or two.

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