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Oil Shocks & Stagflation?
Please check out our YouTube Channel @BensMarketChat for this week’s comment. Don’t forget to like, subscribe, and tell a friend.
With lack of new job creation since Liberation Day last April and an oil price hike to a high of $120 per barrel, its no surprise that investors are fearing a 70’s style oil shock and stagflation.
Despite President’s Trump insistence last night that the war with Iran is coming to an end, Iran’s appointment of the late President’s sone to succeed him implies, they may have a say in the matter.
It is all about oil! At least that’s how the market is behaving. The US is the world’s largest producer at 15% of total production but the Straits of Hormuz account for 20% of oil shipments. So whilst the US may be supply independent, it cannot avoid the commodity price rise and the subsequent inflationary impact on energy and logistics.
President Trump is already under the hammer in terms of affordability which is weighing heavily on the Republicans chances of winning the House of Representatives in November. A continuation of the war could bring the Senate into the Blue corner too. A scenario that is hugely unacceptable to President Trump.
Markets are nervous. Not that you’d notice with the S&P500 Index almost flat on the year. However, dig deeper and the sector breakdown looks very different. Technology is down over 5% whilst Energy is up over 25% YTD. Financials are down 11% whilst Industrials are up 5%.
With interest rates likely to fall under the new Fed governor in May and inflationary fears somewhat cushioned by the deflationary nature of a strong dollar (the safety trade at times of war), economic growth may subside but not fall away and the inflationary threat may not be as large as feared. In a moderate growth economy with stable inflation and falling rates, it is Technology and Financials that benefit. If the war tapers off, its Energy that will suffer.
Always do your own research or seek the advice of your professional financial advisor.
You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.
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By BenPlease check out our YouTube Channel @BensMarketChat for this week’s comment. Don’t forget to like, subscribe, and tell a friend.
With lack of new job creation since Liberation Day last April and an oil price hike to a high of $120 per barrel, its no surprise that investors are fearing a 70’s style oil shock and stagflation.
Despite President’s Trump insistence last night that the war with Iran is coming to an end, Iran’s appointment of the late President’s sone to succeed him implies, they may have a say in the matter.
It is all about oil! At least that’s how the market is behaving. The US is the world’s largest producer at 15% of total production but the Straits of Hormuz account for 20% of oil shipments. So whilst the US may be supply independent, it cannot avoid the commodity price rise and the subsequent inflationary impact on energy and logistics.
President Trump is already under the hammer in terms of affordability which is weighing heavily on the Republicans chances of winning the House of Representatives in November. A continuation of the war could bring the Senate into the Blue corner too. A scenario that is hugely unacceptable to President Trump.
Markets are nervous. Not that you’d notice with the S&P500 Index almost flat on the year. However, dig deeper and the sector breakdown looks very different. Technology is down over 5% whilst Energy is up over 25% YTD. Financials are down 11% whilst Industrials are up 5%.
With interest rates likely to fall under the new Fed governor in May and inflationary fears somewhat cushioned by the deflationary nature of a strong dollar (the safety trade at times of war), economic growth may subside but not fall away and the inflationary threat may not be as large as feared. In a moderate growth economy with stable inflation and falling rates, it is Technology and Financials that benefit. If the war tapers off, its Energy that will suffer.
Always do your own research or seek the advice of your professional financial advisor.
You can find us on LinkedIn and YouTube, Money Matters, Ben Hakham CEO at Traderoutes Capital.