Lately, quite often I can see in the media that different politicians and investment professionals tell us that low oil are good for the economy and market because it will boost spending. At the same time they tell that strong $ also is good for the economy and market. I could be noob, please explain, why??? As I understand 1. If I make $50K per month, low gas will not boost my spending. It does not matter to me. If I make $2K per month, I live from paycheck to paycheck - my spending will remain the same. I spent $3K per month a year ago and I will spend $2K per month now. The only difference is that the extra money saved from oil I will spend on booze - Good for local companies and not good for oil companies (stock market). 2. Low oil prices means the oil production companies will be cutting their labors. Their profit will be down. 3. Stronger dollar mean the production cost will go up - corporations will have smaller profit. Example: Russian ruble is falling and it makes Russian oil production cheaper. US oil production cost goes up (stronger $) and low oil prices - it is double hit. 4. Stronger dollar means weaker export. 5. Stronger dollar in addition to the last Mr. Obama’s announcement to close loopholes for corporations may push corporations to look for cheaper labor outside of US. IBM is already planning big layoffs. Where do you think the majority of cuts will be? Maybe I understand something wrong, but I not getting why strong $ and low oil price are good for the economy and stock market. Is that somebody paying media's contributors to make these statements. Why? To push general public to buy stocks while they dump their own shares… What makes me cautions is an increased volatility. If a year ago bad earnings reports make S&P 500 slide 0.5% top, today, the Nasdaq 100 crashed more than 2%. Investors are nervous and ready to dump on any bad news… We have the heist volatility level since the end of 2011 and it looks like it is going to be even higher. See the S&P 500 4-year chart with ATR (Average True Range) below: chart courtesy of MarketVolume.com
Falling oil prices should benefit U.S. consumers and railroad customers, and be good for rail business in the months ahead, the chief executive of No. 3 U.S. railroad CSX Corp said on Wednesday. "By and large, this (lower oil prices) is a good thing for the economy, for CSX and for our customers," Michael Ward told Reuters in an interview. "It will put more money in consumers' pockets and we will pass on less in fuel surcharges to our customers, which will put more money in theirs."