Posts filed under “Economy”
This chart helps visually highlight the chart we just displayed above and hammer home the point that the next move in crude from its support should dictate near term market direction.
S&P 500 vs. Continuous Crude Oil Contract
click for larger chart
As this layover chart shows crude and the S&P have tended to remain inversely related. When crude scored its recent peak (black arrow) the S&P was setting a trough (blue arrow) and as crude continued to fall the S&P continued to rally.
Quote of the Day:
“Whoever wants to reach a distant goal must take many small steps.”
-Helmut Schmidt, German Chancellor
The election of your lifetime.
That’s what the vote on November 2nd vote has been called. It’s probably a fair description in many, many policy areas. The two major party nominees for President differ on a host of issues, ranging from international affairs to economic strategy to tax policy. Even on basic issues of science – stem cell research (biology), global warming (chemistry), missile-defense (physics) – there are huge distinctions between the Republican and Democratic candidates.
When it comes to the capital markets, conventional wisdom assumes that the outcome of this election will matter a great deal.
Why? There are simply far too many structural factors that will hamstring whoever assume the Office of Presidency on January 20, 2005. The post-bubble environment has problems that will likely be cured only by the passage of time. Large budget deficits will continue, as will the ongoing weakness of the dollar. The economy is likely to grow, albeit at only a very modest pace, for the foreseeable future.
Further, U.S. presidents have far less influence over the macro-environment than most believe. The United States economy is a multi-trillion dollar behemoth, and its business cycle is not readily changed by minor – or even major – course corrections.
Consider the environment the president-elect steps into: With the 2003 stimulus fading, the economic expansion has already started to slow down. The trend of the past four quarters of GDP growth is revealing: 7.4% in the third quarter of 2003, 4.2% in the fourth quarter, 4.5% in the first quarter of 2004, and 3.3% in the second quarter. The end of the softspot was supposed to be 2004′s 3rd Quarter GDP — that came in below consensus, at a (disappointing) 3.7%.
This movement is even more pronounced if we back out government spending on military and wartime explanations.
Unless another trillion-dollar stimulus package is forthcoming – and given the huge deficit, that is highly doubtful – economic growth will be in the 2.5% to 3% range.
And that’s without factoring in the impact of $50-plus-a-barrel crude.