The Chinese stock market and the Baltic Dry Index have an extraordinarily high correlation to one another. In recent weeks, however, we’ve seen a sharp divergence. The correlation is primarily due to China’s large export component. Is the Baltic Dry Index forecasting a slow-down in global shipping and thus a slow-down in the Chinese economy? More importantly, is the stock market (in the U.S. and in China) ignoring this potential warning sign? That has yet to be seen, but the convergence of these two indices is likely in the coming months and that either means a surge in BDI or a collapse in HK….Plan accordingly.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.