Thursday, March 10, 2011

Oil Falls, So Do Stocks

Today was a tough day for anyone holding risk assets. The combination of more rate increases in emerging markets, fears of Chinese growth faltering, Portugal’s debt getting downgraded, and more Middle East tensions had the markets rioting most of the day.

One interesting aspect today was that oil and stocks fell in unison for a change. Since the latest geopolitical tensions started, generally speaking, the trade has been oil up and stocks down, and vice versa. Why has this changed in the last two days? Well, one can only theorize. My guess is it has to do with what Sean wrote yesterday. The decline in copper may just be showing us that the rate hiking campaign along with higher gas prices are now siphoning off world growth. Perceptions change quickly, and overextended markets combined with ebbing global growth expectations might just shake some weak hands out of this market and create some value for those of us looking for a cheaper entry point.