14 Jun 2018
Stock markets feast on doom and gloom. They are more obsessed with anguish than positive economic indicators. The fear factor is ever present! However, optimistically it is often stated that “markets climb a wall of worry”. When things look bleak on many fronts the
one thing you can be sure of is that the price of markets are reflecting the uncertainty.
Today, as is often the case, there are a host of causes for concern, but the one often cited and to the forefront is the oil price. It seems the world is still very reliant on this source of energy. Some pundits I believe are unnecessarily obsessed with its fluctuations.
Oil prices have risen since last July in the region of 70% which seems a staggering figure. However, to put that in context the oil price isstill currently around half the price it was just four years ago! If you look at the twelve month chart the graph looks to be heading for the stratosphere! Although unwittingly it is falling as I write this comment.
I postulate the oil price is no longer the key economic factor of the past and I concede it would be injurious if it climbed to the dizzy heights of the $145 a barrel we experienced in 2008. But, as I write, the price is $66 a barrel - hardly presaging Armageddon!
Things are however very different than 2008. There are big new sources of power in addition to the West’s rush for renewables. As the oil price rises shale oils, fracking, deep sea wells etc. become increasingly economic and switch on their taps.
We must never forget that an enormous percentage of oil is produced in totalitarian regimes. Many of those regimes depend on oil flows to placate their disaffected populaces. OPEC no longer has the power to control its members who are universally desperate for oil dollars at any price.
In conclusion, you may feel stock markets are expensive but I believe the markets are actually being held back by fears relating to the oil price. As those fears evaporate markets will be cheered even beyond what many consider to be a high price. It strikes me as a good time to buy.