The world economy appears to be weakening while the US economy is strong. This is pushing the US dollar higher against foreign currencies and could affect the earnings of companies that rely on exports. The markets were whacked today in part because of this and the Dow was off 602 points on light trading volume to close at 25,387. Utility stocks were mostly up. Tech stocks were lower after an Apple supplier noted weaker forward guidance. This caused the gurus to freak out like kids in the dark old attic and dump stocks. It’s interesting that behind all this, consumer confidence is strong as is the labor market and that demand for chips needed in electric cars and 5G wireless is rising.
Oil prices moved up but could not hold gains and posted an 11-day downturn after Saudi Arabia said it would cut back production by 500k barrels per day because of weak demand and Iran being allowed to continue to pump oil for another 6 months. While the Saudi production cut might indicate slowing global growth, it might also indicate that people do not want to buy oil from Saudi Arabia given certain recent events in Turkey. The US and Russia continue to produce record amounts of oil and retired Chevron CEO John “slick” Hofmeister said the price drop should be temporary and that oil should stabilize around $80 per barrel.
The cause of the euro’s recent decline against the greenback stems from chaos over Brexit negotiations, debt in Italy and a rising disruptive populist political tide stressing the unity of the European Union. In an interesting statement, French President Macron told reporters that the “euro is not a clear alternative to the US dollar” which enjoys global currency reserve status. His comments might portend more weakness in the euro given all its warts. The flaw with the European Union is that it is a common monetary system placed on top of a divergent political system which is like the quote in the Bible about trying to “build a house upon the sand”.
Happy Veterans Day! Hats off and many thanks to all our American soldiers, sailors and pilots who carry the torch of freedom in an often-chaotic world!