What price of oil will make the stock market actually go down?

The market reacts to the price of oil more violently during bull market tops. It reacts to interest rates more during bear markets.

High oil prices stunt growth during good times. During bad times, while oil prices are still important, liquidity in the financial markets is far more important.

 

The market is starting to emphasize inflation. You can already see this priced into the hefty premiums that sellers in the TIPS market demand. It's only a matter of time before it starts to weigh on the prices of stocks.

Right now the stock market is still being fueled by a declining dollar but soon enough this will translate into fear. I expect the mass media to pick up on the stagflation scenario in the next few weeks, with stock and bond markets being sold off in tandem.

 

Good points. I actually see the bottom for the dollar coming up soon. Exports increased by something like 4% last quarter. Additionally, with recessionary fears, I just don't see Americans spending money which is going to start reducing imports. This should help stabalize the dollar's free-fall.

Truth to be told, we have the worst of all worlds over the next quarter. We have a deflated dollar, a huge trade defecit, low interest rates (which cause capital flight) and the rising price of oil.

But the reality is that we really probably need to be in this position to realign the American economy. The good news is that we will hopefully get this "sick" economy the medicine it needs which has been put off for about a year now.

First, I believe that stabalizing the dollar is priority number one, hence the lowering of interest rates and decreasing imports. Once we get the dollar stabalized, then the fed can start raising interest rates again to try and attract the foreign investment back. With an improving dollar and deep discount securities, this could prove really attractive to those foreign investors.

To give a gross analogy, sometimes you just need to barf to get better and trying to hold it in only prolongs the sickness.

So contrary to what most people's opinions are, I think the lowering of interest rates are important even if they are painful at the same time.

 

The media has been draggin the dreaded "s" word around for a month now.

 

Right LOL those guys in the S&P pit who clear Federal Reserve and are always buyers, the ones with the Red White and Blue trading smocks and all have the acronym FED on their floor badge.

 

Nice.. almost busted out laughing in class...

 

There's been an increase in reporting about stagflation between jan 2004 and dec 2007:

http://news.google.com/archivesearc...sa=N&sugg=d&as_ldate=2004&as_hdate=2007&lnav=

There are still only 7,991 recent news items containing the word "stagflation", 4,980 of which were published in the united states. As of yet it's still underemphasized.

 

I didnt bother to google it but you hear it more and more on the business networks from guests

 

Makes sense.

 

I hear yaa it always makes me laugh when people imply that the FED is in buying futures. The secret G-men who pop out of the tiles on the floor of the CME and bid up the market and then sink back in. Hey maybe its one of those “black ops” so when the gov’t pays for those 500 dollar hammers or 700 dollar pencils the money is really being funneled to support the markets.