Markets are usually two-way streets. There are both bullish and bearish factors floating around and investors grapple with this issues to determine whether to buy or sell. Lately, the market has been a one-way ticket to higher prices. It’s not that there isn’t any bearish news out there, it’s that all of it has been completely ignored. This won’t last forever, and one issue that is being ignored is the huge rise in oil prices. At this rate, it will seriously harm economic growth and investors will start paying attention.
Dangerous Crude
Oil is an input that goes into so many products that it is nearly ubiquitous in its uses. When oil prices rise, everything usually goes up in price, so it is very inflationary. I remember several years ago when the stock market and oil prices had an almost perfect negative correlation, meaning that one would go up when the other went down. Nowadays it seems to be the exact opposite because higher oil prices are generally felt to reflect stronger economic growth and demand.
However, oil is starting to flare up on instability in the Middle East, which doesn’t seem like it will go away anytime soon, so any rise in oil prices now is due to negative factors for stocks. In essence it is another “oil shock” like we had in the 1970′s with the OPEC oil embargo. That was a terrible time for stocks and it would be prudent to incorporate this into your investment thesis.
Oil prices are susceptible to shocks due to supply being concentrated in a few regions around the globe, and unstable ones at that. Add to that the fact that so many economies are dependent on oil to function and you have a very combustible situation. I don’t know how high oil will get, but it is knocking on the door of $100 a barrel again, and it seems silly that investors haven’t been the least bit worried about it until now. I am simply saying that it is a negative for the global economy and that it will matter soon enough. Don’t be fooled into thinking that $100+ oil won’t have an impact on your portfolio.
At Some Point, This Will Matter Again is an article from: 
