Sean Hyman
Contributing Writer
instructor@mywealth.com
It seems everything is “touchy” right now with the stock market because people have been seeing their 401ks and IRAs drop like a rock. So right now, investors are hinging upon everything.
This week we’ve got some important events that could change the fate of these assets for the near term.
For instance, OPEC will meet on Wednesday, the 17th to decide if they will cut oil production. Here’s my take. Since Saudi Arabia needs $75 oil to meet their budget and to open up new fields and since Kuwait and Qatar need $55 oil, I’d say they are going to cut and cut big.
There has been talk that the cut could be to the tune of 1.5 million to 2 million barrels per day cut. If so, this would be the biggest cut in a decade. That could really boost the price of oil over time yet again. Since oil is priced in dollars, oil and the buck tend to trade opposite of each other. Therefore if oil shoots up because of the supply cut, then it could weigh on the greenback.
Higher oil and stock prices and a lower dollar could be beginning soon!
So that’s one to watch out for …but here’s another. The Fed will release their decision on interest rates tomorrow at 2:15pm EST. Economists are expecting the Fed to lower interest rates from 1% down to 0.50% (1/2 of 1%) tomorrow. If this happens, it will likely have a negative effect upon the U.S. dollar but could end up being a positive thing for stocks especially the Dow Jones Industrial Average ($INDU) since a weaker dollar tends to help their international operations.
At least the stock market would see further actions from the Fed as “a positive” as they are trying to make borrowing cheaper for businesses and credit cheaper for their customers. Once that works its way into the economy, it tends to give it a boost in the next 6 months to a year. However, it can immediately improve the sentiment even before the rate cuts technically affect the market place.
And sentiment is key in a bear market and an economic recession. They more you can get the consumer to be “up beat” again, the quicker you pull out of “bad times”.
The dollar may finally take a hit, but it’s had a great recovery this year. It has actually gone up as most other things went down. So I’m sure that the biggest concern right now for many people is their stocks.
It never fails that when I get in a crowd and they ask what I do for a living, they immediately start talking about their 401k or IRA. So I know they are feeling the pain.
Therefore, watch to see how these two events pan out over the next couple of days. Because it will affect the direction of oil (which affects everyone), the dollar and the stock market.
