The Price of Gas
The G7 plus Australia have agreed to implement a $60 price cap on barrels of oil from Russia. The reason that this is impactful is that oil is currently trading at around $80 per barrel. This means if these countries are going to buy oil from Russia, they’re going to get it at a deep discount, which would force Russia to sell below market prices. This story ties directly to a story we discussed last week where China may increase its chances of lockdowns to fight some uprisings and protests in that country. Why does that impact this story? That agreed-upon $60 price cap only has teeth if other countries agree to do the same thing as the G7 plus Australia. If Russia can get around it and still sell oil at $80 barrel to the likes of China or India, then there’s no impact on this G7 agreement because Russia will still get the $80 barrel. If China is locking down its economy, then they’re not going to be buying as much oil. This will then have a bigger impact on Russia, which will hopefully weaken its military strength in what is the ongoing battle with Ukraine. Russia’s ability to circumvent any kind of sanctions through China has been a large perceived driving force of Russia’s continued economic success, despite all of the developed world trying to cramp down on their growth. We’re seeing oil rise and not fall as you would expect after hearing this news. This is something we will continue to watch closely.
Jobs and The Fed
The best way to describe the recent jobs report is that it would be good if we were in the right environment, and right now we’re just not in that environment. It’s not a terrible report, it’s more of a mixed bag. Unemployment is low at 3.7%. Wage gains are up 0.6% month over month, and up 5% for the year. Payroll is up $263,000. That’s all good news but with this environment, where the Fed is hiking rates and we’re seeing wage gains of 5% at the same time, they’re saying that’s too hot. They think that’s tying into inflation where they might need to do another 50 basis point hike in December. The participation rate, which is the number of people actively looking for a job, fell again. We need more people looking for jobs to relieve some of the stress from supply chain issues. We’re still trying to catch up in the leisure and hospitality space. You will see in a chart shown in this episode where we were pre-covid and where we are now. We have gained a little bit, especially in some areas, but we’re still trying to play catch-up in leisure and hospitality. The next jobs report we get will be next month. Hopefully, we can see some things that will lead the Fed to believe that they don’t have to hike as much or as viciously as they have previously.
Fi Plan Partners is an independent investment firm in Birmingham, AL, with a team of professionals serving clients across the nation through financial planning, wealth management and business consulting. The team at Fi Plan Partners creates strategies in the best interest of their clients using fee based 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.
Economic forecasts set forth in this presentation may not develop as predicted.
No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.
Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.