Our human brains are wired to reduce complexities into simpler parts, from which we then draw linear conclusions. While this may have served us well from an evolutionary standpoint, it often misleads us when it comes to navigating financial markets.
The financial landscape is littered with many examples of this, the most enduring of which might be the “market as economy” paradigm, which always seeks to explain market moves with economic rationale.
Breakeven rates are all the rage these days. The chart below has been posted (and printed) all over the place showing the huge rally in breakeven rates since the lows of March 2020. People are looking at this rally and using it as evidence that the US economy (and by extension the world’s) is on the verge of “boom times!”
Crude oil is another commodity that market participants like to look at in order to gauge the overall health of the global economy. The logic here is the same as with copper, since oil is what the modern industrialized economy runs on, a higher price per barrel must mean strong global growth… right?
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