During my junior year in high school, as part of our lacrosse team training, our coach entered us into a 5K road race. I remember his advice before the event: “Guys, you can’t sprint a long-distance course.”

Same applies to investing. Building your retirement portfolio isn’t a 100-yard dash. It’s a marathon. Which is why today’s stock market decline was to be expected, after a four-day rally that breached new highs. Wall Street needed a breather, before the next leg.

A trigger for today’s equity decline were reports that President Trump intends to press ahead with tariffs against $200 billion worth of Chinese products. It also didn’t help that the deadline for a revamped North American Free Trade Agreement (NAFTA) is tomorrow and the U.S. and Canada were still negotiating today with many sticking points remaining.

The Dow Jones Industrial Average fell below the psychologically important level of 26,000. The CBOE Volatility Index (VIX), known as the fear index, jumped 9.88%. That said, positive economic data offset trade fears and kept losses in check.

The U.S. Commerce Department reported today that consumer spending rose 0.4% in July after rising by the same margin in June. Households spent more at restaurants and on accommodations, a reflection of resilient consumer confidence.

But red flags are appearing. Europe and Japan are struggling with slowing growth, in part due to the trade war. Another worrisome indicator is the falling price of copper.

Red scare…

Copper is a widely used commodity so sensitive to economic conditions, it’s viewed as a leading indicator. Because it’s a time-proven predictor of economic trends, copper is said to have a PhD in Economics. Hence the metal’s nickname “Dr. Copper.”

The price of the red metal has been plummeting (see chart, compiled with data from the Commodity Futures Trading Commission):

Investors are savoring the stock market’s gains this year, but headwinds are gathering. The strengthening U.S. dollar, rising interest rates, worries that tariffs will dampen exports to China, and slumping currencies in developing nations are weighing on commodity prices.

Copper prices now reside in bear market territory, down by more than 20% since June. The trend could presage an imminent economic downturn.

What’s more, oil prices have been extremely volatile over the past three months, due to sputtering emerging market demand and a rising dollar that makes crude more expensive for countries that pay with weaker currencies (see chart, compiled with data from the U.S. Energy Information Administration):

Rising oil production has changed a previously bullish supply picture and added downward pressure on oil markets. Today, oil prices bounced back somewhat, but the energy patch’s good news/bad news scenario should keep crude range-bound in the near future.

West Texas Intermediate (WTI), the U.S. benchmark, rose 0.92% today to close at $70.15 per barrel. Brent North Sea crude, on which international oils are priced, rose 0.44% to close at $77.80/bbl.

Last week, reports surfaced that Saudi Arabia had called off its much-ballyhooed, $100-billion-dollar initial public offering (IPO) of state-run energy firm Aramco. Even plans to list the company on the Saudi domestic bourse, Tadawul, were scrapped. The deal’s financial advisors were sent packing, without the fat fees they had expected.

The listing was to be the largest IPO in history and supposedly represented the kingdom’s intention to pivot away from its economic over-dependence on fossil fuels. What happened? Some analysts blamed infighting between the House of Saud and Aramco executives.

More likely, the Saudis realized that the Hydrocarbon Age wasn’t about to end anytime soon and the growing appetite of emerging markets for automobiles would drive oil demand far into the future.

In a report in June, the World Bank noted that two-thirds of the increase in energy demand over the past 20 years came from seven emerging countries: Brazil, China, India, Indonesia, Mexico, Russia, and Turkey. That makes crude oil extremely sensitive to these countries’ ups and downs, which in turn makes trade tensions all the more dangerous.

When a tariff fight broke out between the U.S. and Turkey earlier this month, the domino effect was plain to see. Prices for commodities such as copper and crude oil, as well as emerging market currencies, took a huge hit. Argentina’s peso and Turkey’s lira remain under severe pressure.

A contagion among world stock markets is just a tariff battle away. Under these fraught conditions, you should transition toward stocks that are somewhat insulated from trade conflict, such as utilities, health care, and consumer staples. These sectors also tend to do well during the late stage of an economic recovery.

This bull isn’t dead yet. But as a long-distance runner you should know when to ease up, so you can go the distance.

Thursday Market Wrap

• DJIA: 25,986.92 -137.65 (0.53%)
  
• S&P 500: 2,901.13 -12.91 (0.44%)
  
• Nasdaq: 8,088.36 -21.32 (0.26%)
  

Thursday’s Big Gainers

• Insys Therapeutics (NSDQ: INSY) +34.05%

FDA grants fast-track status to biotech’s lead drug.

• Reis (NSDQ: REIS) +32.18%

Real estate data firm targeted for buyout by Moody’s (NYSE: MCO).

• K2M Group Holdings (NSDQ: KTWO) +26.03%

Medical device maker to be acquired by rival Stryker (NYSE: SYK).

Thursday’s Big Decliners

• Cronos Group (NSDQ: CRON) -28.41%

Influential short-seller knocks cannabis firm.

•  Quantum (NYSE: QTM) -20.45%

Data storage device maker seeks loan refinancing assistance.

• Abercrombie & Fitch (NYSE: ANF) -17.17%

Apparel retailer misses on revenue.

Letters to the Editor

“What does it mean for a stock to consolidate?” — David L.

Consolidation occurs when a stock neither continues nor reverses a larger price trend. Consolidated stocks typically trade within limited ranges and offer few trading opportunities until a new pattern emerges.

Any investment topics you’d like me to cover? Let me know: mailbag@investingdaily.com

John Persinos is the managing editor of Investing Daily.