Market Correlations: Trade-Weighted Dollar Yardeni Research, Inc. September 27, 2021 Dr. Edward Yardeni 516-972-7683 [email protected] Joe Abbott 732-497-5306 [email protected] Mali Quintana 480-664-1333 [email protected] Please visit our sites at www.yardeni.com blog.yardeni.com thinking outside the box Table Of Contents TableTable OfOf ContentsContents TWD & Commodities 1 TWD & EM MSCI 2 TWD & Inflation 3 TWD & Profits 4 TWD & Expected Inflation 5 Gold, Crude Oil, & Trade-Weighted Dollar 6 Misc. 7 September 27, 2021 / Trade-Weighted Dollar Yardeni Research, Inc. www.yardeni.com TWD & Commodities Figure 1. 70 700 INDUSTRIALS COMMODITY 75 PRICE INDEX & TRADE WEIGHTED DOLLAR 650 80 9/24 600 85 CRB Raw Industrials 90 Spot Price Index* 550 (1967=100) 95 500 JP Morgan Nominal 100 Broad Effective Exchange Rate** 450 105 (inverted scale) 110 400 115 350 120 9/27 300 125 250 130 yardeni.com 135 200 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 * Includes copper scrap, lead scrap, steel scrap, tin, zinc, burlap, cotton, print cloth, wool tops, hides, rosin, rubber, and tallow. ** Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: Commodity Research Bureau and JP Morgan. Figure 2. 85 160 BRENT CRUDE OIL PRICE & TRADE-WEIGHTED DOLLAR 150 90 140 95 130 120 100 110 105 100 90 110 80 115 70 60 120 9/27 50 125 Brent Crude Oil Futures Price* (dollars per barrel) 40 130 30 JP Morgan Nominal 20 135 Broad Effective Exchange Rate** (inverted scale) 10 yardeni.com 140 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 * Nearby futures price. ** Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: JP Morgan and Haver Analytics. Page 1 / September 27, 2021 / Trade-Weighted Dollar Yardeni Research, Inc. www.yardeni.com TWD & EM MSCI Figure 3. 85 1500 EMERGING MARKETS MSCI STOCK PRICE INDEX & 90 TRADE-WEIGHTED DOLLAR 9/24 95 100 1000 105 110 115 Emerging Markets 120 9/27 MSCI Stock Price Index 500 (in dollars) 125 JP Morgan Nominal 130 Broad Effective Exchange Rate* (inverted scale) 135 yardeni.com 140 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 * Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: JP Morgan and Morgan Stanley Capital International. Figure 4. 85 100000 EMERGING MARKETS MSCI STOCK PRICE INDEX & 90 TRADE-WEIGHTED DOLLAR 95 80000 100 9/24 105 60000 110 115 40000 120 Emerging Markets 9/27 MSCI Stock Price Index (in local currencies) 125 JP Morgan Nominal 20000 130 Broad Effective Exchange Rate* (inverted scale) 135 yardeni.com 140 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 * Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: JP Morgan and Morgan Stanley Capital International. Page 2 / September 27, 2021 / Trade-Weighted Dollar Yardeni Research, Inc. www.yardeni.com TWD & Inflation Figure 5. 4.0 70 INFLATION & TRADE-WEIGHTED DOLLAR Jul 3.5 80 JP Morgan Nominal Broad Effective Exchange Rate* 3.0 (inverted scale) 90 PCED: Total Ex 2.5 Food & Energy (yearly percent change) 100 2.0 110 1.5 9/27 120 1.0 130 .5 yardeni.com .0 140 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 * Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: US Department of Commerce, Bureau of Economic Analysis and JP Morgan. Figure 6. 75 15 US IMPORT PRICES & TRADE-WEIGHTED DOLLAR 80 85 JP Morgan Nominal Broad Effective Exchange Rate* 10 90 (inverted scale) (120.4) 95 Import Price Index: Nonpetroleum Imports Aug 100 (yearly percent change) (5.9) 5 105 110 115 0 120 9/27 125 -5 130 135 yardeni.com 140 -10 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 * Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: Bureau of Labor Statistics and JP Morgan. Page 3 / September 27, 2021 / Trade-Weighted Dollar Yardeni Research, Inc. www.yardeni.com TWD & Profits Figure 7. Q2 -16 20 S&P 500 REVENUES PER SHARE & US TRADE-WEIGHTED DOLLAR -14 (yearly percent change) -12 15 -10 -8 10 -6 -4 5 9/24 -2 0 0 2 4 -5 6 8 -10 10 12 -15 JP Morgan Nominal 14 Broad Effective 16 Exchange Rate* S&P 500 Revenues -20 (inverted scale) (-3.0) (using dollars per share) (21.7) 18 yardeni.com 20 -25 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 * Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: JP Morgan and Standard & Poor’s. Figure 8. -30 45 S&P 500 FORWARD EARNINGS & US TRADE-WEIGHTED DOLLAR (yearly percent change) 9/16 -20 30 -10 15 9/24 0 0 10 -15 JP Morgan Nominal Broad Effective Exchange Rate* 20 (inverted scale) (-3.0) -30 S&P 500 Forward Earnings** (36.9) yardeni.com 30 -45 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 * Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. ** Time-weighted average of consensus estimates for current and next year. Source: I/B/E/S data by Refinitiv and JP Morgan. Page 4 / September 27, 2021 / Trade-Weighted Dollar Yardeni Research, Inc. www.yardeni.com TWD & Expected Inflation Figure 9. 80 3.4 TRADE-WEIGHTED DOLLAR & EXPECTED INFLATION 3.2 3.0 90 2.8 2.6 2.4 9/24 100 2.2 2.0 1.8 110 1.6 1.4 JP Morgan Nominal 1.2 120 Broad Effective 1.0 Exchange Rate** 9/27 (inverted scale) .8 .6 130 Expected Inflation .4 in 10-Year TIPS* .2 .0 yardeni.com 140 -.2 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 * Yield spread between 10-year US Treasury bond and comparable TIPS. ** Argentina, Australia, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Egypt, France, Germany, Hong Kong, Hungary, Japan, India, Indonesia, Israel, Italy, Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nigeria, Norway, Pakistan, Panama, Peru, Philippines, Poland, Romania, Russia Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Kingdom, Ukraine, Uruguay, Venezuela, Vietnam, and United States. Source: Commodity Research Bureau and JP Morgan. Page 5 / September 27, 2021 / Trade-Weighted Dollar Yardeni Research, Inc. www.yardeni.com Gold, Crude Oil, & Trade-Weighted Dollar Figure 10. 150 2500 GOLD PRICE & WEST TEXAS INTERMEDIATE CRUDE OIL PRICE Gold Price* (dollars per ounce) 2000 9/24 100 West Texas Intermediate Crude Oil Price (dollars per barrel) 1500 1000 50 500 yardeni.com 0 0 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 * Cash price.