Tuesday, January 6, 2015

Stocks and Oil Took Really Big Hits Yesterday ... Oil's Down Again Today ... Now What?

Both stocks and oil prices fell sharply yesterday as stock averages dropped almost 2% while oil prices dropped by more than 5%. See U.S. Stocks Tumble, Along With Oil Prices.

Both were really big moves, and the oil price decline doesn't appear near its end yet. It's down an additional 2% this morning and has fallen in price by more than 50% the past few months. And when it will stop falling and at what price it will then be, nobody knows.

With respect to stocks, the U.S. markets are getting to look like a bargain, and prices may stabilize soon -- even today. That said, trying to catch a 'falling knife' can be dangerous to your financial health. In fact, although we may be in for a better day today, the rough and volatile ride up and down for share prices is definitely not over.

Here's what I believe --- short term traders should beware and long term investors should remain calm.

Meanwhile, the U.S. dollar rallied again yesterday, interest rates fell and European countries continue trying to fight off a weakening currency, no economic growth, and rising deflationary prospects.

These are definitely interesting times as we enter 2015.

All that said, after we get through this rough patch, the prospects for both the American economy and stock prices look good from now to year end and beyond. And it looks especially bright for U.S. consumers due to declining oil prices, a stronger dollar, more jobs and higher economic growth.

As our U.S. economy continues to strengthen, interest rates stay low far into the future, the dollar strengthens further, and lower energy and other import prices put more money in our consumers' pockets, it's easy to be optimistic about the outlook for U.S. businesses and our economy's prospects.

While the rest of the world struggles, our own domestic economy will keep chugging along, jobs will grow, and the stock market will resume it upward climb. At least that's how I see things

Thus, yesterday's oil price and further interest rate declines, accompanied by a stronger dollar, are all positives, and I'm not at all discouraged about the fall in share prices. In fact, other than the dreary outlook for energy companies, of course, things in the market look good to me.

That's my take.

Thanks. Bob.

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