Highlights of this Week’s Review:
- S. stock indices eke out small gains for the week.
- Oil continues to fall, gold rises.
- Interest rates flat for the week with little change.
- Oil supply/production affects prices, but so does the strong dollar.
Read on for more details…………………………………………………..
The Markets:
Last week saw both the Dow Jones Industrial Average and Standard & Poor’s 500 stock indices end with very small gains. The Dow was up just .35% and the S&P 500 closed .39% higher. Interest rates remained flat while oil prices fell. The average 30 year fixed rate mortgage ended at 4.08%, while the 15 year fixed rate stood at 3.19%. West Texas Intermediate Crude Oil dropped $2.50 per barrel to finish the week at $75.93, the lowest in four years. Gold prices rose by $14.50 per ounce, closing on Friday at $1,169.00. (MarketWatch, Bankrate.com,CNBC, Energy Information Admin.)
Oil’s relationship with the dollar
The drop in price of a gallon of gas since the spring has been hard to miss. As of November 15th, Gasbuddy.com reports the average price of regular gasoline in the U.S. is $2.90 per gallon. Not surprisingly, it varies widely from state to state. South Carolina is the cheapest at $2.64 per gallon. If we throw out Hawaii ($3.96) and Alaska ($3.58), New York has the dubious honor of sporting the highest price in the 48 contiguous states at $3.26.
As we head into the holidays and the inevitable trips to the mall, it’s an early Christmas present for consumers, though it is bringing some angst among producers. Clearly, gasoline prices are closely tied to the price of oil, which brings us to the next question – will prices rebound or are we entering a period where oil floats in a lower range?
In some respects, it’s an impossible question to answer. What will OPEC do if prices continue to decline? Saudi Arabia, the world’s largest oil producer, is an enigma, and the kingdom’s decisions surrounding prices are sometimes shrouded in mystery. Will global hotspots interrupt production and support prices? Libya, Nigeria, and the Middle East in general have the potential to create unwanted surprises. These are variables in the pricing equation that are difficult to forecast.
So why have prices plunged? For starters, soaring U.S. oil production, compliments of the shale revolution (see Figure 1), and a soft economic outlook outside the U.S.
But let’s not discount the recent surge in the dollar. Oil is priced in dollars when sold around the globe. In other words, when Germany or France or nearly any other country buys oil, it pays in dollars. And the stronger greenback has pressured oil prices.
Coincidentally (or not), the latest upward move in the dollar happens to coincide with the recent plunge in oil prices – see Figure 2.
Earlier in the year, weaker oil was perceived as a proxy for weaker global economic activity – a negative for stocks. Today, the continued decline is being viewed more as an issue of oversupply; therefore, investors are taking a more sanguine approach.
We are booking year-end reviews for the rest of the year, and if you have not yet scheduled your personal review time, be sure to call us today. We appreciate the privilege of serving you now and in the years to come.
God Bless,
Your TEAM at F.I.G. Financial Advisory Services, Inc.
It is important that you do not use this e-mail to request or authorize the purchase or sale of any security or commodity, or to request any other transactions. Any such request, orders or instructions will not be accepted and will not be processed.
All items discussed in this report are for informational purposes only, are not advice of any kind, and are not intended as a solicitation to buy, hold, or sell any securities. Nothing contained herein constitutes tax, legal, insurance, or investment advice.
Stocks and bonds and commodities are not FDIC insured and can fall in value, and any investment information, securities and commodities mentioned in this report may not be suitable for everyone.
U.S. Treasury bonds and Treasury bills are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.
Past performance is not a guarantee of future performance. Different investments involve different degrees of risk, and there can be no assurance that the future performance of any investment, security, commodity or investment strategy that is referenced will be profitable or be suitable for your portfolio.
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.
Before making any investments or making any type of investment decision, please consult with your financial advisor and determine how a security may fit into your investment portfolio, how a decision may affect your financial position and how it may impact your financial goals.
All opinions are subject to change without notice in response to changing market and/or economic conditions.
1 The Dow Jones Industrials Average is an unmanaged index of 30 major companies which cannot be invested into directly. Past performance does not guarantee future results.
3 The S&P 500 Index is an unmanaged index of 500 larger companies which cannot be invested into directly. Past performance does not guarantee future results.
4 New York Mercantile Exchange front-month contract; Prices can and do vary; past performance does not guarantee future results.
5 London Bullion Market Association; gold fixing pricing at 3 p.m. London time; 2013 year-end price fixing at 10:30 a.m. London time; Prices can and do vary; past performance does not guarantee future results.