Reasons Why Oil Is Driving Stock Market
The current situation relating to the price of oil is nothing but an outcome of certain changes brought about in the supply and demand chain cycle. Many factors have led to the influence of this change. The global economy, numerous political elements and the stock market are among the few that have brought about an influence. This has subsequently led to an environment wherein oil has ended up possessing a majority of the driving force in various fields. Here is a list of the top five reasons why oil is driving the stock market:
A FORM OF ALERT SIGNAL
Lower oil prices and other such similar commodities such as copper are indications toward a gradual slowing of the global economy, as a whole. While, importers are enjoying a jolly time, especially given the reductions in the prices of oil, exporters such as China and Japan are in a difficult position.
PERSONAL STOCK HOLDINGS OF EXPORTERS
The majority of oil export nations is hoping for higher levels of tax revenues from oil. For instance, Saudi Arabia had 635 billion dollars in foreign exchange reserves, while Russia monetary reserves consisted of 40 billion dollars. This is leading to their ultimate budget deficits in the coming months. Pressure on stock prices are just rising by the day.
BUYERS ARE DIFFICULT TO FIND, TOO
Due to the given situation, a wave of selling has set into motion subjecting major indexes to experience a troublesome period of time. This naturally causes a pause in the market’s progress. Moreover, due to the plenty other worrisome developments weighing on the market; a scarcity of buyers is being felt throughout.
CONTRIBUTION TO THE NATION’S WEALTH
For those who are looking to save money at gas stations seem to be concentrating their conserved expenditure on things that don’t seem to profit the nation’s wealth.
“Household finances are growing healthier . . .but you want to see a pickup in spending, too,” said Tim Courtney, chief investment officer of Exencial Wealth Advisors.
THE FEDERAL RESERVE
The Federal Reserve has been signaling toward a rise in the rates to prevent inflation and bring the situation under control. This is expected to start anytime soon, perhaps even next month itself. Contrary to this, numerous investors have been worrying that the market might drop sharply and cause an overhaul. Furthermore, Fed officials have expressed their concern about China’s slowdowns that hold significant risks involved in the U.S. economy. This is also subsequently leading to the selling off of stocks.
“The market was saying, ‘Start lifting rates. Let’s get this over with. Now the market is concerned that Fed is worried the economy is slowing,” said Ernie Cecilia, chief investor officer of Bryn Mawe Trust.
As you can see; a lot truly depends on the changes that are caused in the prices of oil. Although, despite of the above given issues, the U.S. economy seems to be recovering fast and looks a lot healthier in the recent time. Unemployment rate has come down to 5.3 percent.