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  • Stocks Plunge Most On Record Last Week, Oil Down 10%

    In the first week of 2016, US stocks plunged by more than in any other first week of January since records have been kept (before 1900). The Dow Jones Industrial Index fell over 1,000 points from 17,591 at the close on December 31 to 16,519 at the close last Friday – a loss of over 6% in one week.

    The S&P 500 Index shed over 100 points from 2043.7 at the close on December 31 to 1922.0 at the close last Friday – a loss of 6.0% in one week. The Nasdaq Composite lost 7.3% during the worst first week of January on record.

    Most global stock markets were hit with similar losses or even worse in some cases. Investors around the world were stunned and are wondering what happened in the worst New Year’s  week in history for share prices – and worry if more pain is to follow.

    The financial media maintained that the carnage was caused primarily due to new economic data out of China, which was worse than expected. I will get into that as we go along today, but the rout was due to more than just disappointing Chinese data.

    The collapse in crude oil prices since mid-2014 is also becoming a serious global concern for reasons I will outline below. The price of West Texas Intermediate Crude has collapsed over 70% since mid-2014 from near $105 per barrel to below $33 a barrel as of last Friday’s close. It fell 10% last week alone and is down so far this week.

    While sharply lower gasoline and energy prices are a boon to consumers, there are now serious concerns about sovereign debt defaults in numerous oil producing countries. In addition, there are growing fears of global deflation as a result of collapsing oil and other commodity prices. I will tell you why below.

    Yet before we get into the complicated issues raised above, let’s take a few moments to discuss last Friday’s stronger than expected unemployment report for December.

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  • Economic Optimism Abounds As Crude Oil Plunges

    Each year at this time, we see a plethora of fresh forecasts for the New Year, and this year is certainly no exception, especially with the recent implosion in oil prices. There is widespread agreement that sharply lower energy prices will provide a boost to the global economy this year, especially for oil-importing nations including the US.

    As a result, almost all of the New Year forecasts that I have seen in recent days have been upbeat and revised higher with regard to the US economy. With that in mind, I thought it would be a good idea today to revisit the recent developments in the oil and energy markets over the last six months. What we have witnessed since last summer has been nothing short of breath-taking, to say the least!

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