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Global Macro: Autos, Palladium Strong in a Weak Economy

NEW YORK ( TheStreet) -- The Federal Reserve extended its stimulus program on Wednesday, saying the economy has improved only gradually. U.S. auto sales, though, have been zooming.

U.S. auto sales have reached multiyear highs, which has implications for financial markets as seen below.

The first chart is of First Trust NASDAQ Global Auto Index (CARZ). The index reached yearly highs, thanks to strong domestic and global demand.
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The European economy has vastly improved since Europe's debt crisis, and strong sentiment surrounding the region has pushed European equity indexes to record highs.

The recovery of U.S. and European consumer spending should continue to push auto indexes higher, and the strong uptrend represented by the chart below shows no sign of a major pullback.

The next chart is of ETFS Physical Palladium Shares (PALL).

Palladium is considered a precious metal, known as a less expensive version of platinum. As a precious metal with industrial properties, it generally trades alongside most other metals such as gold.
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Palladium is used in cars as a converter in the exhaust of harmful gases into cleaner substances such as water vapor. Increased demand for cars supports its price.

As most precious metals sold off in August following diminished fear over conflict in Syria, palladium showed relative strength among the group.

With the Fed's announcement on Wednesday, precious metals received a strong bid higher. Palladium accelerated off of its monthly lows after the announcement and continued its move higher into Thursday as most other assets pulled back.
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The combination of low interest rates and strength in the auto industry should continue to push both palladium and car makers higher for as long as stimulus and economic data persist.

At the time of publication the author had no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Andrew Sachais' focus is on analyzing markets with global macro-based strategies. Sachais is a chief investment strategist and portfolio manager at the start-up fund, Satch Kapital Investments. The fund uses ETF's traded on the U.S. stock market to gain exposure to both domestic and foreign assets. His strategy takes into consideration global equity, commodity, currency and debt markets. Sachais is a graduate of Georgetown University, where he earned a degree in Economics.

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