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Note the strong rally in Industrials:
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Materials have also shown strength in recent weeks:
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But in relative terms this is a mere stroll and not a marathon run:
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Even when China and other economies pick up it will be a whole new resources order. The next economic revolution is unlikely to be a materials one but rather services and technology. Sure there is much needed construction in developing countries but this will be long and slow and so the materials frenzy we saw 2002-2007 we may never see again.
‘Industrials’ cannot go up like this forever. This rally has continued unabated since 2012 – almost four years – without correction. Expect a correction even though it may not be any time soon:
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Financials still have some easing to do:
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And that could pull the XAO lower:
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But there are numerous dark political clouds hovering over the world today and still scary economic bubbles and cover ups in developing countries so there are any number of ‘X’ factors that could put the wind up global markets.
Enjoy the ride
Tom Scollon
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