As we mentioned last week the Shanghai equity markets have served as a leading indicator of U.S. stocks over the last year. While Shanghai has broken down and moved sideways over the last few months we have seen similar sideways action in the Baltic Dry Index. Not surprisingly, the fundamental correlation between China’s export driven economy and this shipping index are high. With a 30%+ sell-off currently in process in the Baltic Dry Index we have to ask ourselves if the fundamentals in China and the global shipping industry aren’t weaker than many equity markets would have you believe.
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.