Where Oil is Headed Next

(September 2020)

Oil prices are in a very interesting place. The market has rallied significantly since its spring lows, and it has a very nice tailwind behind it. That tailwind is the weakening US Dollar. Oil is priced in Dollars, so a weaker dollar makes it cheaper for other countries to buy oil. However, on balance, most analysts think oil prices will likely stagnate or fall from here, especially considering the huge volume of existing oil inventory globally. For instance, according to RBC capital, "We believe that the impact of a cheaper dollar from current levels will see a minimal impact on crude purchases, irrespective of slightly more favorable crude pricing ... The relationship between demand and price elasticity is blunted in the current environment, because oil is already cheap and readily available and there currently exist a dearth of buyers".

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Why Emerging Markets are Looking Like a Good Bet

(August 2020)

Investors in emerging markets are getting more and more excited about the prospects for the asset class. The big reason why has to do with the US Dollar. Emerging markets are highly sensitive to changes in the strength of the Dollar and tend to perform well when the Dollar is weak. According to Ritholz Wealth Management, between 1974 and 2019, in years when the Dollar rose, foreign stocks on average returned 2%, while emerging markets gained 2.7% versus a 10.8% return for the S&P 500. However, in years where the Dollar fell, foreign stocks rose 18.6% and emerging market stocks returned 22.5% versus a 12.8% rise for the S&P 500.

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Goldman Warns a Real Correction Looms

(September 2020)

Some investors are worried that last week's mini-meltdown might be the start of something worse. Goldman Sachs is not helping anyone with those fears this morning. While the bank is actually bullish on stocks in the long haul, their announcement today offers cold comfort. Goldman says that if investors start to doubt the ultra-quick recovery that has been priced by the market, then a further 10% fall is a possibility as investors reassess the economy's growth trajectory.

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