Highlights of this Week’s Review:

  1. S. stock indices eke out small gains for the week.
  2. Oil continues to fall, gold rises.
  3. Interest rates flat for the week with little change.
  4. 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.


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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.