Technical & Fundamental Oil Reports Specialists

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Transitory or secular?

Published Tuesday, May 5th, 2015

Yet another week passes that leaves key economic issues unresolved and if anything more confusing than ever. Stock markets are defying the old adage that uncertainty is bad for business but perhaps from an equity investor point of view there is no real uncertainty because so many central banks are committed to monetary easing. In the real economy Greece is still hanging on by its fingernails to eurozone membership and we are none the wiser whether Grexit will be a disaster for all concerned or only for Greece. Eurozone finance ministers are keen to hand over €7.2 bn but Greece will not utter the magic words “we will embrace austerity” that will break the deadlock and release the funds.

Anyone hoping that at least the strength of the US economic recovery would be confirmed was in for a disappointment with 1Q GDP growth coming in at only 0.2%, well below expectations of 1% and 4Q’s 2.2%. There were plenty of warnings beforehand that 1Q is historically a poor quarter and this would be worse than most because of a strong dollar, poor weather and a lengthy port strike, but to miss expectations by so much was an unpleasant surprise. The Federal Reserve said that it believed the weak performance was “transitory” leaving investors none the wiser whether US interest rates will rise in the summer, autumn, early winter or never this year.

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Posted by David Hufton