Predicting Commodity Rallies And Energy Stock Gains Using The Global PMI

Copper is trading at a 52-week high, oil is above $90 a barrel and the S&P 500 Energy Index just hit a fresh all-time high.

Long-time readers of the Investor Alert and Frank Talk should have a good idea of why metals and energy are surging right now, but for everyone else, I have three letters for you: PMI.

We’ve shown numerous times in the past that the PMI, or purchasing managers’ index, is an effective economic leading indicator. Unlike gross domestic product (GDP), which looks in the rearview mirror, the monthly PMI gazes forward at the road ahead.

global manufacturing

S&P Global, which produces the JPMorgan Global Manufacturing PMI, literally surveys purchasing managers from around 13,500 companies in as many as 40 countries, representing 95% of the world’s manufacturing output. It’s a remarkably thorough, comprehensive and reliable gauge of whether factories are expanding production, and by how much.

In February, the Global Manufacturing PMI turned positive for the first time since August 2022, registering a 50.3. That’s great news, but there’s more: Just a month earlier, in January, the PMI’s monthly reading crossed above its three-month moving average. This “golden cross,” as we’ve shown before, signals a higher probability that prices for copper, oil and other key materials will increase in the coming months on higher manufacturing demand.