The Dow Jones Index has been hitting record highs lately and spreading good cheer to investors in the process. Oil, meanwhile, has lost something like 20% of its value from its highs seen a few months ago.
What is also interesting is that both markets are moving against their normal seasonal trends. Oil usually starts rising around October in anticipation of rising fuel demand for winter. Stock markets on the other hand tend be very wobbly and dip around September / October. The reason for this is not entirely clear, but the pattern is well documented and tends to occur practically every year - even in bull markets.
However, we’re only about a third of the way through October, so there is still time for both markets to adjust to their normal seasonal trends.
Meanwhile, the papers attribute the fall in oil to lessening tensions in the Middle East, namely the Lebanon/Israel issue has settled a bit and the bust-up over Iran and nuclear weapons has calmed down. There’s growing US oil stocks. The Caribbean hurricane season has so far been less violent than meteorologists predicted. Then throw in the fact that Autumn has been mild to date and you have your explanation for the dip in oil prices. All of this, say analysts, has removed a lot of the speculative froth that was underpinning oil prices.
As for the Dow Jones, well cheaper oil is helping of course. It takes some pressure off inflation. That might suggest that interest rates have peaked and the market is already anticipating lower funding costs and more liquidity once the Fed starts cutting. But more importantly corporate profits are at record levels and there’s constant speculation about take-overs buoying equity markets.
All these are perfectly rational arguments explaining why markets are behaving the way they are at the moment.
It is common knowledge that the US government manipulates the stock market upward ahead of elections to create a feel-good factor. Indeed, the effect of the US electoral cycle on stock markets is another well documented phenomenon. Often it is called the Presidential cycle. It usually starts to kick in two years before the Presidential elections.
There have been suggestions that this happening right now.
However, there are also suggestions that the US government is manipulating oil prices lower. According to Casey Research, there is a particularly strong correlation between George Bush’s popularity and oil prices. The lower they are, the more popular he tends to be and vis-versa.
Casey Research gives a clue to oil’s weakness being in the crack spread. This is the difference between oil and petrol prices. Right now that margin is particularly narrow, meaning that refiners are making very little profit on sales of petrol.
This situation is illogical, why would refiners accept such a state of affairs?
The suggestion by Casey Research is that some sort of deal has been struck between the Republicans and the oil industry to bring about lower petrol prices for consumers/voters. The researchers point to the very strong links between big oil and the various figures heading the Bush administration including the main man himself.
But as Casey Research admits there’s no way to prove the theory and it is just that, a theory.
However, it will be interesting to see what happens to oil and the Dow Jones post May 7. May/June tend to be particularly bullish months for both markets.
Once the votes are in and counted, could the Dow Jones then buck its normal trend and go into reverse? Whilst oil surges back to new highs?
What is also interesting is that both markets are moving against their normal seasonal trends. Oil usually starts rising around October in anticipation of rising fuel demand for winter. Stock markets on the other hand tend be very wobbly and dip around September / October. The reason for this is not entirely clear, but the pattern is well documented and tends to occur practically every year - even in bull markets.
However, we’re only about a third of the way through October, so there is still time for both markets to adjust to their normal seasonal trends.
Meanwhile, the papers attribute the fall in oil to lessening tensions in the Middle East, namely the Lebanon/Israel issue has settled a bit and the bust-up over Iran and nuclear weapons has calmed down. There’s growing US oil stocks. The Caribbean hurricane season has so far been less violent than meteorologists predicted. Then throw in the fact that Autumn has been mild to date and you have your explanation for the dip in oil prices. All of this, say analysts, has removed a lot of the speculative froth that was underpinning oil prices.
As for the Dow Jones, well cheaper oil is helping of course. It takes some pressure off inflation. That might suggest that interest rates have peaked and the market is already anticipating lower funding costs and more liquidity once the Fed starts cutting. But more importantly corporate profits are at record levels and there’s constant speculation about take-overs buoying equity markets.
All these are perfectly rational arguments explaining why markets are behaving the way they are at the moment.
It is common knowledge that the US government manipulates the stock market upward ahead of elections to create a feel-good factor. Indeed, the effect of the US electoral cycle on stock markets is another well documented phenomenon. Often it is called the Presidential cycle. It usually starts to kick in two years before the Presidential elections.
There have been suggestions that this happening right now.
However, there are also suggestions that the US government is manipulating oil prices lower. According to Casey Research, there is a particularly strong correlation between George Bush’s popularity and oil prices. The lower they are, the more popular he tends to be and vis-versa.
Casey Research gives a clue to oil’s weakness being in the crack spread. This is the difference between oil and petrol prices. Right now that margin is particularly narrow, meaning that refiners are making very little profit on sales of petrol.
This situation is illogical, why would refiners accept such a state of affairs?
The suggestion by Casey Research is that some sort of deal has been struck between the Republicans and the oil industry to bring about lower petrol prices for consumers/voters. The researchers point to the very strong links between big oil and the various figures heading the Bush administration including the main man himself.
But as Casey Research admits there’s no way to prove the theory and it is just that, a theory.
However, it will be interesting to see what happens to oil and the Dow Jones post May 7. May/June tend to be particularly bullish months for both markets.
Once the votes are in and counted, could the Dow Jones then buck its normal trend and go into reverse? Whilst oil surges back to new highs?
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