Oil Indicates Weak Dollar and Better Economy
Oil’s climb to $80 per barrel is indicative that the economic wheel’s are turning. Stimulus efforts, deficit spending and infrastructure investment has giving economic activity a jump, however the fundamentals remain weak.
GDP Growth
US GDP numbers came in incredibly strong. Though you would expect rebounding stock prices and firming dollar, the dollar dropped, stocks rose, and gold advanced. The fact that the dollar dropped and anti-dollar investments rose on a stronger economy should be a little worrisome. It is clear that any rally in the markets is going to be a weak dollar rally, not a strong economy rally.
Oil’s Getting Expensive
Can you feel it at the pump yet? I can. Oil prices have advanced to $80 per barrel well before I could have expected. Though oil tends to move with the economy, there are still huge stocks of oil left unused. This shows that investors are looking towards the future and willing to pay a premium to be anti-dollar and strong economy. But while the pricing rebound may be here, the job report will tell it all.
Jobs Report
The market is expecting job losses of 166,000 people after 263,000 job losses the month prior. That may be a tough target to meet as only a few thousand jobs were added locally in homebuilding a just a few employees were added to car production. If the numbers come in better, then the market should explode on the news. But for the numbers to come in, this fourth quarter will have to perfect for retail.
The holiday retail season might be even weaker than expected. Yikes.