Time to harvest?
Is oil the proverbial thermostat for the market? In recent years the onset of high oil prices has been an indication of massive global consumption and ultimately consumer confidence degradation. Summer of 2006, oil prices started to show their capability for inflating price potential. Oil started to mark record price per barrel and companies that affiliated themselves with oil or oil production were at their respective zenith. Interestingly enough, this asset inflation historically represented a correction in the equity market. However the market persevered… for awhile. In early 2007 the market started to show its true colors. The equity markets started to quiver under poor economic conditions domestically and abroad. The consumer was stepping away from the market and on the horizon the unthinkable was taking the stage. May 17th Ben Bernanke states the growing number of mortgage defaults will not seriously harm the U.S. economy. By June the market has now hit an all time high. The bond market feels the rumble of uncertainty and begins to rally in price. A major price increase, and in turn decrease in yields, in the bond market occurs nearly simultaneously with the market high. By the end of the year massive liquidation of unstable debt and movement to safety, in the form or Treasuries, signals the crisis that will unfold over the next 2 years. In our opinion – the rapid market upswing may not have the fundamental support it needs to stave off the gravity of the fearful consumer. Could high oil prices drive the consumer back out of the market? Are we poised to see inflation- Taking a look at your portfolio now and often through the next 6 months could be the best advice one could provide. Making certain you are within your risk tolerance and in line to meet your goals.
Farmers will tell you- It’s better to pick the fruit too early over too late.
Recent Article on oil pricing and its potential impact on the markets. http://www.ft.com/cms/s/0/28f1e2a6-432e-11df-9046-00144feab49a.html
Enjoy, Gill Capital Partners.