According to a recent Cornerstone Macro report, the three most influential macro trends this year have been

1) the strengthening U.S. dollar,
2) the flattening yield curve
3) slowing global manufacturing expansion.

Iíve written about all three topics numerous times this year, but the one Iíve watched the most closely has been global manufacturing, as measured by the purchasing managerís index (PMI). Since its 12-month high of 54.5 in December 2017, the PMI has declined in eight of the past nine months. September marked the fifth straight month of slower manufacturing growth.




This matters because the PMI is a useful, forward-looking indicator of the economic health of the manufacturing sector, which accounted for around 15.6 percent of global gross domestic product (GDP) in 2016.
Our research has shown that the index can be used to forecast world demand for materials and energy one, three and six months out, with a reasonable measure of accuracy.

Take a look below. The chart shows that, based on 10 yearsí worth of data, copper and West Texas Intermediate (WTI) crude, as well as energy and materials equities, all benefited in the three months after the PMI crossed above its three-month moving average. WTI saw the biggest jump; 64 percent of the time, it gained 5 percent on average.

Conversely, in the three months after the PMI crossed below its three-month moving average, those same assets either fell or were effectively flat. Seventy-one percent of the time, copper lost a little over 1.5 percent on average when manufacturing growth began to slow.

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