Last week was a big week in the markets with not a lot of encouraging economic news. Janet Yellen said that a rate hike looked appropriate in the coming months. The Fed meets again in June but she will speak again this coming Monday. Hopefully we will get more information then.
What’s the big deal about the Fed?
When the Fed raised interest rates in December, the markets fell 12% in the following weeks. That could happen again in June if Janet Yellen keeps to her statement. There is also an uncertainty over the election to add on top of that. We are keeping a close eye on these two factors as they could have tremendous impact on our clients’ portfolios.
The biggest gain in 6 years
Consumer spending came out this morning and posted the biggest gain in 6 years! This is very important. It looks like consumers are starting to spend the money they have been saving at the gas pump. This also gives Janet Yellen and the Fed the ammo they need to raise interest rates in June.
Big meeting for oil
OPEC is meeting this week which will be their first meeting with their new OPEC minister from Saudi Arabia. Just like a supreme court jdge, an OPEC minister can serve for years. This position has only had two predecessors in its history. It will be interesting to see what he does at the helm of his first meeting and what his agenda will be. We don’t expect a production limit coming out of this meeting.
Oil’s $50 per barrel is not too high, not too low
The $50 per barrel oil price right now is at an interesting inflection point. It’s not high enough to cause oil companies to begin new drilling sites, but it is high enough to stop the bleeding of oil producers that we saw when prices were down. This price is also still low enough to encourage consumer spending that we are now seeing.
Encouraging economic news
Finally, we are seeing positive economic news from the low oil prices we have had for 18 months now. Seeing a rise in consumer spending is very encouraging economic news. Hopefully, we will see more encouraging economic news this week as we watch the jobless claim numbers from the ADP Jobs Report and the government’s jobless claims report, which will include the unemployment rate. When we last saw these reports in April the numbers where down, but hopefully they will have reverted themselves.
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