WSJ What’s News - Alternative Indicators: What’s Dr. Copper’s Prognosis for the U.S. Economy?

Episode Date: November 12, 2025

Economists and investors have long turned to copper as a reliable economic indicator: High prices meant the economy was humming, and low prices meant it wasn’t. That’s in part because copper is useful for so many economic activities. In fact, copper was considered such a good signal that investors gave it a nickname—Dr. Copper. But now, as high demand and tariffs affect copper prices, is the commodity’s relationship with the economy becoming blurry? Host Alex Ossola discusses this with Dec Mullarkey, head of investment strategy and asset allocation at SLC Management. This is part two of our four-part series on alternative economic indicators. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Is the economy hot or not? The picture seems to be murky lately. If you're a glass-half-full kind of person, you could point to the stock market's strong performance, robust consumer spending, or a relatively low unemployment rate. But if your glass is half-empty, you might be fretting over other not-so-positive signs. Inflation is still high. Consumers are feeling pessimistic about the economy. And jobs are getting harder to find. Delayed economic data because of the government shutdown has done little to clear things up. So looking at other alternative stats may help us get a pulse on the economy, even if that data can be messy.

Here's WSJ Investing columnist Spencer Jacob. The thing is, if you go into it with an open mind, you can learn some things. If you don't have a narrative, if you're going in and saying, hey, what can I find out? What tea leaves can I read? And if lots of them are turning in a certain direction, that's an indication even when you're not seeing it in the official economic data. So this is a pretty good time to be doing it. But it's really always a good time to look at these things.

This is a special episode of What's News. I'm Alex Osloaf for the Wall Street Journal. This is the second episode of our series on alternative economic indicators that might help us gauge how the U.S. economy is doing. In our first episode, we talked about how Nevada's employment rate can be a sign of how consumers are feeling about spending their money. Today, we're talking about something a bit bigger on a global scale, copper. For about four decades, economists and investors turned to copper as a reliable global economic indicator.

High prices meant the worldwide economy was humming, and low prices meant it wasn't. In fact, copper was considered such a good signal that investors gave it a nickname. Dr. Copper, because, depending on who you asked, the metal supposed to be able to. supposedly had a Ph.D. in economics, or maybe that's an MD for the economy. It's a great bellwether for the economy. So people think it can diagnose what's going on and reflect that in its price. It's amazing markets grab these nicknames and they just stick. That's Deck Mularky, who heads up investment strategy and asset allocation at SLC management. For nearly 35 years, Malarkey has used his understanding of the economy to advise clients on what to

invest in. And he says the metal has been impossible to ignore. Copper's power as an economic gauge comes from the fact that copper is used in so many activities that drive the global economy, including plumbing, construction, and transportation. Its electrical properties give it a widespread roll from the delicate wiring and smartphones to building out a region's power grid. But Malarkey told me that over the past decade or so, the relationship between copper and the global economy has gotten a bit blurry, as copper demand in certain countries has risen without necessarily boosting overall global economic activity. He and I discussed what this means for the U.S. economy. I take it that copper is one of the commodities that you follow. How long have you been

paying attention to it? Copper is the equivalent of oil. You can't ignore it. So I would say I've been tracking it most of my career. But it became dominant. in the last 25 years. And that was a result of China joining the WTO in 2001. And that's when the building boom started. And copper was so essential to that. And as a result, was so essential to China's growth. So it became a bellwether for how China was doing. And there, of course, were influencing growth in the rest of the world as well. So you can't ignore copper. Let's talk about this moment. So what are the numbers showing us right now? Where are copper prices and demand? Right now, copper prices are almost at historic high. I mean,

they just literally backed off it. And there's a couple of things driving that. So maybe we talk fundamentally like what is different now? First of all, China actually, their building boom has slowed. So that piece has gone away. But they're still a lot of housing starts and they're still refurbishing and growing that. But we have a lot of really significant growth. And that's both from building out, say, sustainable energy, the whole data center AI build that's coming along, the expectation that we're going to have to spend a lot more on defense. We have throughout the world aging electrical system. We talk about the grid and that distributes energy. All of that is fairly haggard at this point. It really does need an upgrade. And so we've got all of this

demand that's starting to come along that we have to cope with. And that is now creating this surge of demand for copper. And even just to maybe simple, we're entering a whole tech stage. Copper is essential to all of that. Okay, I want to dig into that for just a moment because I thought copper was an indicator for the U.S. economy, but it sounds like it could be bigger than that. Copper is an international business. There's some copper mining done here. A lot of it is done in Chile, China, other places in the world. So it's a global commodity, right? And it's priced that way. So if you've got a building boom going on any piece, it's going to pull the price up for everyone. But, you know, this phase we're going into is everybody's

spending more on defense. And again, I can't overstate the demand for data centers. So we are into this phase where those are global themes. Everybody has to attend to those issues. And again, this aging infrastructure in terms of energy distribution that has to be upgraded. It's all coming at the same time, which is castoric. This is quite an inflection point. So then I would think just based on how high prices are and how high demand is, that that would mean we're in a really good economic moment. Is that what that means? That would absolutely tell you all that. And we are. We're well positioned. Now, there's a lot of geopolitical risks. There's a lot of noise around tariffs and how that might impact growth. But if you look at a lot of other indicators and you look at the stock

market as an example, that's on a tear. Corporate earnings are terrific in this country. That's generally the case across most other regions. That all points to a lot of optimism around that growth. If you were to just look at the growth factor, which is what copper is pointing to, to that's basically saying things are great here and there's a lot of demand for me and that's reflected in my price. Coming up, from recycling to AI, we dig into a few things that may affect copper's reliability as an economic indicator. More after the break.

You know what's better than the one big thing? Two big things. Exactly. The new iPhone 17 Pro on Tullis' five-year rate plan for, price lock. Yep, it's the most powerful iPhone ever, plus more peace of mind with your bill over five years. This is big. Get the new iPhone 17 Pro at tellus.com slash iPhone 17 Pro on select plans. Conditions and exclusions apply. Are there problems with using copper as an economic indicator? Like if I were

an investor and saying, like, I'm going to bet the farm on what copper is telling me. Would I run into trouble doing that? You would. There's everything I talked about, which is creating all this demand. But you have this also, other offset, the actual supply of copper, because you can't turn it on that fast. If you think about mining production, that's usually set out like 10 years in advance. If copper prices get out of hand, you can also find. substitutes. Aluminum is one of those substitutes. So the price of copper is four times as high as the price of aluminum. That's the point when people start to substitute. And then if the miners can't increase output, recycling scrap becomes more of an issue. So at some point, it gets too expensive.

And then everybody goes to these replacement options. You did mention AI, but I'm wondering, because we've really been following all of these announcements about new data centers, this, an investment in that. And I'm curious whether that is affecting copper price. There's no question. That's a hard one to handicap. Where is AI going to go? And at what pace? All of those projections may work out, but they might come over 10 years, not two. The one thing I would say is the data centers themselves, surprisingly, don't use as much copper as you would think. More of the demand will come from having to upgrade the actual grid to support the data center. So that's where that will come from.

So you're absolutely right. There's a lot anticipated in that price as to where things are going. And that's where if those expectations either were delayed or regulation all of a sudden put a little bit of a stop to them, prices could unwind because of that. So you're absolutely right. It's a tricky situation you're in. And it's also dependent on there's going to be a significant defense spend and all of those things. So those all factor in there. Based on where prices are right now, where would you place your bet? Where do you think the U.S. economy is headed. I think the U.S. economy is going to have a strong year this year and continue with a strong year next year. The only thing, it's hard to sometimes handicap policy, you know, in terms of where geopolitical risks may end up. Now, copper is right now its price in the U.S. is reflecting some of that potential tariff risk and copper has got hit with tariffs, but it's anticipating a little more. And the way we can tell that is the price of copper in the U.S. usually trades in line with the price of copper in Europe. Right now, the U.S. is trading at a premium

reflecting the expectation of more tariffs. And that differential, just to kind of give folks some context here, the average differential between those markets in like 2022 and 23, that may have been 10 bucks. Back a couple of months ago, when tariffs looked like it was going through the roof and it looked like copper might be getting hit all over with tariffs, that differential was 3,000. So that was way, way out there. So that's kind of its own dynamic of how copper is picking up that geopolitical risk. You're anticipating that this year will be good and next year will be good. But there's data to contradict that. You know, there's a softening labor market, consumer sentiment is quite low. How do you factor that in to the other things that you're

thinking about? Certainly if you look at the U.S., so much is driven by the consumer and people will spend as long as they have a job. So the first metric in anything you ever look at in the U.S. economy is how is the labor market doing? And it has come off the boil. If that really goes down, you would see a fairly significant reset. And I think you'd see a reset in equities as well. The economy, it's settling into a stage and the issue is, will it kind of plateau here and not take another leg down? And so that's what everybody is watching. That was Deck Mularky, who heads up investment strategy and asset allocation at SLC management. Today's show is produced by Julie Chang with supervising producer Jana Heron.

Next up, in our Economic Indicators series, we zoom in on a different part of the U.S. economy, manufacturing, and look at what sales of heavy trucks can show us about it. That'll be in your what's news feed on Monday. I'm Alex Oscella, and we'll be back this evening with our regular show. Until then, thanks for listening. Thank you.