When lumber crashes, will stocks follow? ‘Few understand this’ says Michael Gayed
When the lumber to gold ratio spikes, it's usually a signal that risk on sentiment will remain strong, said Michael Gayed, portfolio manager at Toroso Investments.
Gayed has been tracking the lumber to gold ratio as part of his Lead-Lag report, and his studies have found that peaks and troughs usually lead equity rallies and declines, respectively.
However, given the spike in lumber prices, it's only a matter of time before prices mean revert downward, meaning a stock market correction could be on the horizon.