Friday’s market rally
Last week we were disappointed with the European Central Bank and the amount of stimulus they will issue. This caused the markets to trade back Thursday. The jobs report however, was a huge improvement which caused a market rally on Friday.
Small and gradual interest rate increase
We have received several comments from our listeners about an interest rate increase and how it will impact their investments. We believe the Fed now has the ammunition it needs to raise interest rates in their meeting this week. While we could see an interest rate increase next week, we believe it will be small and gradual. (More in the video)
How did Black Friday and Cyber Monday turn out?
This week the National Federation of Independent Business (NFIB) reports their small business sentiment which will have a lot of great data. On Friday we will also see in the retail report on how Black Friday and Cyber Monday turned out.
The war between OPEC and US frackers
We believe there is an economic war between OPEC and the frackers in the United States. In their meetings last week OPEC decided to throttle down their production. The frackers in the United States however, are not taking their production offline. There are three reasons they are not. First, they have to keep the cash flowing. Second, they’ve locked in price production levels with futures contracts years ago, so they are insulated from the price drop. Thirdly, many major oil companies paid in cash over four years ago for big oil projects in the Gulf of Mexico. Those are due to come online in 2016 and the cost is already absorbed.
In 2016 we see US oil production staying the same and potentially going up. At the beginning of the year we predicted oil would get down to this level and we believe it could still go lower.
Restoring consumer confidence
The combination of a slight interest rate increase and lower gas prices could restore consumer confidence in the economy, moving investors to get off the sidelines. The US economy is starting to stand on it’s own two feet. Hopefully it will begin moving away from the Central Banks and get back to good old economics.
[contact-form-7 id=”8119″ title=”Portfolio Team Blog Comment Form 2015″]
Trey Booth, CFA®
Email Trey Booth here
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. Government bonds/notes are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.
Economic forecasts set forth in this presentation may not develop as predicted.
Stock investing involves risk including potential loss of principal.