Displaying items by tag: energy
The market’s outlook grew significantly dimmer yesterday. The Fed made clear that investors should not expect a rate cut in a July, which took the wind out of equity investors’ sails. With that in mind, here is a list of ten stocks that should help investors win in a downturn. The theme here is “low volatility” stocks, or stocks with less risk that should outperform the market in a choppy environment. The list: Aflac, Amdocs, American States Water, Atmos Energy, DTE Energy, Duke Energy, McDonalds, NextEra Energy, OGE Energy, WEC Energy Group.
FINSUM: Given the Fed’s reversal from what the market thought was its stance yesterday, right now does seem like a good time for low volatility stocks.
Oil has been whipsawing all over the place lately. For the last several weeks, oil has mostly fallen, with some short term big rallies along the way. One of those was just a couple days ago when Saudi Arabia and Russia announced an agreement to cut output. However, the bottom has fallen out of the commodity as Saudi Arabia’s energy minister announced that he would only favor a small cut. This led to big doubts about whether the efforts will actually lower supply, sending prices spiraling down 5%.
FINSUM: This seems to be a direct consequence of the US’ ability to boost its production to offset any declines by OPEC. Accordingly, Saudi Arabia doesn’t want to lower its revenue by cutting only for the US to take advantage.
Oil has been falling for several weeks, with prices dipping below the $50 mark for US crude. However, over the last couple of days, the price of black gold has surged. Investors may be left wondering what it all means. The answer is that Saudi Arabia and Russia announced their intentions to work together on another output cut, which sent prices surging. On the sidelines of the G-20, the Saudis and Vladimir Putin agreed to extend their output cuts. At the same times, Canada announced a curb on production.
FINSUM: Just as we have been saying, current movements in oil are particular to the sector and not indicative of the wider economy.
When oil falls it tends to boost the US economy. For all the growth of our shale industry, the US is still a net importer of oil. When prices fall, Americans tend to spend more on other items that boost the economy, so oil prices sinking is usually good news. However, this time around, the fall will be bad, at least according to the Wall Street Journal. The problem is that the oil industry has grown large enough that capital expenditures in the sector make a major impact on growth. Accordingly, the capex cut that will come from falling prices will be prove a net detriment to GDP figures.
FINSUM: When oil fell in 2014-2016, US economic output also slowed, so this is a very real affect. What is worse is that it will likely show up in 2019, which is already looking to be a much weaker year.
Oil prices have taken a nose dive lately, and yesterday officially fell into a bear market. Prices on Brent crude fell below the $70 per barrel mark for the first time since April. US crude is even lower, with prices sitting at $59 per barrel. For most of the summer the market was worried about undersupply, but the US has been more generous with sanction exemptions on Iran, and the US, Russia, and Saudi Arabia have all boosted output, alleviating fears and pushing prices lower.
FINSUM: The oil market seems to be trading based on supply and demand fundamentals—just like it should. It is very hard to predict how things will progress.