Taking Stock Of Deflation: Food And Fuels
- Increased commodity production is squeezing profit margins and scaring away large investors.
- Alternative energy stocks will struggle as long as oil becomes relatively less expensive.
- Reactionaries will likely oversell, creating energy equity opportunities in 2015.
Markets Will Take A Hit If Fed Raises Rates
- Historical data reflects large stock market losses following each EFF hike.
- Increased borrowing and capital costs will change company valuations.
- Increased default risk leaves banks exposed during rate hikes; insurance companies stand to benefit.
Treasury Movements Signal Long-Run Doubt
- A shrinking spread between 2-year and 10-year UST reflects long-run investor doubt.
- Positive Q2 numbers are overshadowing areas of real concern for future growth.
- Expect to see continued, and potentially increased, uncertainty leading to flight towards less risky assets.
Could Iraq Cause Another Oil Rally?
- Short-term rallies in oil based on negative Middle East headlines will be transitory.
- Long-term trend in oil still positive but for different reasons.
- Increased production in both US and Iraq should stabilize market prices.
What's Next For The Euro?
- The latest actions out of the ECB to lower rates validates our earlier call to sell Euro-denominated assets.
- While the rate cut should further incentivize Eurozone investors to spend rather than save, longer-term economic issues still exist in the region.
- We feel there are near-term concerns for long investors in FXE and advise seeking out USD exposure such as the UUP.
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