Not a Good Combo: Stretched Copper, SPX, Rate Hikes Central banks hiking rates, along with stretched prices and valuations, are usually not a good combination for copper and the S&P 500 (SPX). The CME-traded metal's 100-day correlation with the SPX reached 0.65 in August, its highest ever during a rising market. Correlations typically gravitate toward 1-to-1 on the way down. Is it a warning? My bias leans that way, and the graphic highlights two reasons: Fed funds futures in one year (FF13-FF1) are pricing 70 bps of rate hikes, last matched on the way down in 4Q21, and the same-chart syndrome of copper and the SPX in stretched zones near 40% premiums to their 200-week means. Two key factors that could help alleviate Fed tightening are mean reversion in elevated SPX and/or crude oil. Lower crude may boost the stock market and lead to more wealth-creation inflation. On the Bloomberg here: https://blinks.bloomberg.com/news/stories/tl6ztckip3id {BI COMD} #copper #stockmarket @BBGIntelligence(Mike McGlone)