Tuesday, February 10, 2009

Understanding the Baltic Dry Index

Bespoke Investment Group has a post of their wonderfully simple charts and graphs:

...And while the Baltic Dry doesn't have much correlation with US stocks, it does follow China's equity market pretty closely. Over the Baltic Dry's 16-day winning streak, China's Shanghai Composite index is up 14% as well, and it really looks like it's beginning to turn a corner. Below we provide charts of the Baltic Dry Index compared to both the S&P 500 and China's Shanghai Composite. While the percentage changes are more extreme for the Baltic Dry, the direction of its move is very similar to China and not so similar to the US. Given the fact that China is such an export based economy, it's no surprise that this trend exists.