Can the U.S. Economy Survive $100 Crude Oil?
The big question is if crude oil is headed higher, how much of a price increase can the US economy afford and withstand?
Here is a raw commodity that is used by everyone and the US has no control over it. This key commodity to commerce just happens to be in areas that are hostile to the US. If we see a hiccup in the supply chain that changes this market dynamic, even for a short time period, we could see oil move back to the $100/barrel range in a heartbeat.
How will this affect the US equity markets? If crude oil heads back to the $95-$100 range, I expect that the economy will take a hit and that will send the major indices south. In this short video, which Adam Hewison of MarketClub made a few days ago, he shares with you the potential target zones that we could see in the next 6 to 12 months in crude oil.
With the trend in crude oil in a positive trajectory, and the trend in the US equity markets also on a positive trajectory, something has to give. I expect the trend in these two markets to eventually decouple and go their separate ways.
As always, we will be monitoring our “Trade Triangles” for signs of weakness in the either the equity or crude oil markets.
We welcome your comments and feedback on this and all the posts we make on this blog.
Would love to read a review of the UK economy as well. From where I sit it looks as dreadful as ever. Surprisingly, we are still in recession after so many efforts. I just hope it doesn’t get worse than this.