Fresh stock market records are a great way to end a week.

The Dow touched 40,000 for the first time yesterday, doubling up the 20,000 it hit roughly seven years ago.

But it’s not just equities moving up and to the right — key commodities have taken parabolic paths to start the year.

One in particular might just tell the story of the entire economy.

The economic outlook, as told by copper

No one can predict the future, but copper prices offer a shorthand crystal ball.

Over the years the commodity has proved telling enough to earn the moniker “Dr. Copper,” as it provides insights to the health of the economy.

We use the industrial metal to build houses, electric vehicles, appliances and, increasingly, bits and bobs for artificial intelligence. 

Now, it seems to be flashing a bullish signal for the economy. 

It’s no secret that stock market investors have capitalized on the AI-boom, though the underlying commodity has had a banner stretch itself, too. 

To be sure, extra volatility hit copper this week as a short squeeze drove an unusual disconnect between prices in New York and London. There have also been growing concerns of a looming supply deficit.

That said, investors have ramped up exposure to copper for months — prices are up 26% year-to-date. 

Greg Halter, the director of Research at the Carnegie Investment Counsel, a $5 billion wealth advisory firm, told me copper’s recent price spike indeed looks bullish for the broader economy, particularly as Big Tech giants pile into data centers and AI.

“I don’t think you really can separate all the AI enthusiasm and economic strength,” he said.

The spending plans for Microsoft, Alphabet, Amazon, Meta, and Apple support Halter’s view.

Together, these five companies expect to spend about $195 billion total in 2024. 

That’s 17% more than last year, and nearly a ten-fold increase compared to a decade ago.

Optimism colors the backdrop here. After Wednesday’s cooler-than-expected CPI report, markets brought Fed rate cuts back into the conversation. 

Then on Thursday, as mentioned above, the Dow breached 40,000 for the first time.

Animal spirits have returned to markets in “dramatic fashion” on account of the upbeat economic outlook, according to DataTrek Research.

“This newfound confidence in global growth is mirrored in commodity markets,” said Nicholas Colas, co-founder of DataTrek Research.

It’s possible the rally in copper could drop off as soon as next week, depending how Nvidia’s earnings look. 

Should the leading AI and chip giant fall short of Wall Street expectations, the repercussions may stretch out to the entire sector. 

Still, in Halter’s view, demand for AI isn’t falling off anytime soon, which suggests the market for copper will remain robust. 

After all, ChatGPT debuted only about 18 months ago. The industry looks set to iterate on large language models and other AI tools for decades to come. 

“The AI enthusiasm is real,” Halter said. “And it’s showing up in the real economy with this metal.”

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