Oil Prices Plunge into Bear Market Territory
Oils prices dipped into bear market territory while Brexit progress is halted and Amazon takes steps to their new headquarters. Get insight into these stories and more by reading on…
What to Make of Oil Prices– oil prices underwent their longest losing streak ever, eclipsing 12 consecutive days of declines and dipping into bear market territory. After reaching a multiyear high of $76.41 a barrel on October 3, oil prices have been in a seeming freefall plunging into the mid-$50’s. Oil prices are inherently volatile, so wild swings are a common occurrence even within economic expansions. In our view, there’s no real need to sound an alarm. When looking for drivers of the tumble, one might surmise that oil prices perhaps inched up too quickly and steeply on concerns of Iranian sanctions, and now the market is responding to the actual outcome and conditions that point more towards oversupply coupled with softening global demand. In all, we see the recent action as crude simply responding to supply and demand conditions in the global economy, and we do not read the decline as a signal of some impending doom for stocks or economic growth. Over the weekend, Saudi Arabia announced it would cut its exports to boost prices to avoid an oversupply, and the market could very well be overestimating the softening of global demand. Investors and markets will be watching the OPEC meeting next month in Vienna for signs of production cuts.1
Scanning the financial news headlines could leave you with the impression that the ‘trade war’ is partly to blame for the recent market volatility. The trade war is set to increase costs, crimp economic growth, and bring about more inflation. Right?
Not necessarily – there’s a valid argument that suggests trade is actually becoming freer even in this time of heightened trade disputes.
If this is the case, then what factors are causing volatility? Get the answer to this question and more in this month’s Market Strategy Report.
If you have $500,000 or more to invest, click on the link below to get your free report today!
Brexit Progress Isn’t Really Progress at All – Brexit negotiations continue to resemble an outright mess for the British government, as disagreements abound and the EU looks increasingly like they have a much stronger hand in the negotiations. What was initially viewed as a positive step forward this week – when British Prime Minister Theresa May announced a draft agreement with the EU on Brexit – quickly fizzled once it was circulated around the British government and met with criticism on all sides. The ‘deal’ would in fact keep Britain following many of the EU’s regulations and applying its tariffs, while also substantially reducing Britain’s ability to influence policy in the EU. In all, it felt like a proverbial ‘kicking of the can down the road,’ to buy more time for the British government to continue negotiating a way out. If there was indication of the sentiment surrounding the deal, two of May’s top senior cabinet officials quit the day after the announcement. The next phase of Brexit will see the draft agreement go to a vote in the House of Commons, likely within the next few weeks.3
The Amazon Headquarters Contest Produces Two Winners – in a drawn-out process that involved 236 cities bidding for Amazon to establish its second headquarters, the winners have finally been revealed: Crystal City, Virginia and Long Island City, N.Y. The contest lasted 14 months and saw cities offering substantial tax breaks and perks to try and attract Amazon, but it appears that the final decision weighed heavily on the presence of qualified tech workers. Both chosen cities and the areas surrounding them (Northern Virginia and New York City) have dense tech labor forces, which could not be matched by rural locations. The deal came with substantial tax breaks, with New York offering a package of nearly $3 billion, while Virginia’s incentives totaled around $2.5 billion, including direct payments to Amazon and commitments to make improvements related to the projects. In exchange, Amazon is set to bring 25,000 new jobs and about $2.5 billion of investment, as well as billions of dollars of infrastructure and real estate development, and tax dollars.4
Important New 401(k) Guidance Worth Noting – The Labor Department this week ruled in favor of allowing the Retirement Clearinghouse LLC of Charlotte, N.C., to automatically transfer 401(k) balances of less than $5,000 to a new employer’s 401(k) plan. This has good potential to help investors – often times, employees with small balance 401(k)s leave employment and just end up cashing out their 401(k), which results in penalties, taxes, and of course a setback for retirement savings! The move by the Labor Department is an effort to “reduce the premature flow of money out of 401(k)-style plans.” Industry research shows that about 30% of people leaving jobs choose to cash-out their 401(k) accounts and pay taxes—and often penalties—instead of leaving the money in the retirement account or transferring it to their new employer’s retirement plan. Hopefully the new Labor Department guidance can help reduce some of this retirement asset “leakage.”5
Want to learn more about the ever-changing market landscape and key economic factors that influence it?
Look no further than our Just-Released Market Strategy Report.6 This report dives into a topic that has been flooding headlines – trade.
It looks at the truth about trade and if it is the cause of recent volatility.
If you have $500,000 or more to invest and want to learn more, click on the link below to get your free report today!
2 Zacks Investment Management reserves the right to amend the terms or rescind the free Market Strategy Report offer at any time and for any reason at its discretion
3 The Wall Street Journal. November 15, 2018. https://www.wsj.com/articles/european-officials-to-meet-to-approve-draft-brexit-deal-1542269504?mod=djem10point
4 The Wall Street Journal. November 13, 2018, https://www.wsj.com/articles/how-amazon-picked-hq2-and-jilted-238-cities-1542153869
5 The Wall Street Journal. November 12, 2018. https://www.wsj.com/articles/labor-department-clears-path-for-automatic-401-k-transfers-1542045512?mod=djem10point
6 Zacks Investment Management reserves the right to amend the terms or rescind the free Market Strategy Report offer at any time and for any reason at its discretion
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