Who Is Dr. Copper? Why It Matters For Your Investment Portfolio

Zinger Key Points
  • Copper names like Rio Tinto are trading higher as commodity prices rise throughout the world.
  • Copper is in everything... it’s a barometer for financial and economic health, Stephen Hoad tells Benzinga.

We typically go to the doctor's office for checkups or when we have a health issue, not for financial advice. But, there’s one doctor that may have a significant impact on your investment account: Dr. Copper.

Dr. Copper is a nickname that investors and economists have given to the chemical element copper for its ability to “diagnose” the economy. This is because copper is used in pretty much everything; transportation, electronics, construction and more.

So, when the demand for copper is rising, it usually means economic activity is also going up. And the opposite is true, too. When copper demand falls, it’s typically associated with a decline in economic activity.

“Copper is in everything, it fixes houses, technology, it’s a barometer for financial and economic health,” Stephen Hoad, former commodities and energy trader for Koch Industries, said in a live interview on Benzinga Live.

Hoad added that you can look and see where the global demand for copper is coming from and get an even better understanding. For instance, China accounts for more than 50% of the world’s copper consumption, so when demand for copper is exceptionally high, it’s considered a sign that the Chinese economy is strong. 

So What’s Copper Been Doing Recently?

Copper futures are trading around $4.05 a pound, up more than 25% from their lows back in July. In July, fears about a recession were sweeping through global markets, pushing the price of copper and other commodities lower. But, since then, inflation has cooled here in the U.S. and other parts of the world, China has eased its COVID restrictions and equity markets have somewhat recovered.

Southern Copper Corp’s SCCO stock is up more than 50% throughout the last 6 months alone. Other copper names like Rio Tinto RIO are also trading higher as commodity prices rise throughout the world. 

But, copper futures still aren’t quite back to their all-time highs of nearly $5 a pound. So, it will be interesting to watch the price of copper and if "Dr. Copper" will give us any clues into the health of the global economy.

Image by Jody Davis from Pixabay

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