Policy Makers and CommentatorsInteresting to consider the causes of the current general market falls: China rebalancing; recent and possible future Fed rate rises; central banks out of ideas and have overplayed QE; debts linked to low oil price.
Whilst all of these merit some concern, none are likley to be terminal in the short to medium term. But commentators do seem to be missing the main threat to the global economy. That being a very high oil price that will stay very high, probably from the end of this year onwards. When I look at the recent rig data, particularly in the US with their very short production well half life, but also accross the globe, I cannot see how a high oil price can now be avoided going forward.
The high oil price will suffocate the current low growth, even in the UK. Late 2017 and most of 2018 are likely to see negative or zero economic growth accross most of thge developed world. We will see a reverse of the current situation where oil is one of the few sectors making large profits during this period.
The Telegraph writers, who tend to be very well informed on the City perspective, spoke this week about a 'wall of money' in London now waiting for the turn in the oil price.
For those of us who make most of our living from investing, I think it may be very important to make the oil sector recovery price moves count over the next year or two. Opportunities thereafter may well be thin on the ground for some time.
All the best.
Doug