Chart of the Week and Weekly Report Highlights
This week: Global Growth Scare, Stocks vs Bonds Outlook, Taking Stock of Defensive Assets, European Risk Pricing, Equity Sentiment Trends, Crude Oil prices
This email provides a look at what we covered in the latest Weekly Insights report
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Chart of the Week - The Real Price of Crude Oil
Crude Oil Prices in Perspective: I wanted to share this one because it really helps put things into perspective, and in many respects is perhaps one of the most important macro/market developments this year (decade?).
And, uh - it gives me a chance at word-play: the chart shows the “real price“ of crude oil (i.e. deflated by CPI to show historical oil prices expressed in today’s dollar terms)… but also gives a reference to the very real price that is being paid in terms of how we got here, and the ripples and consequences of the current move in crude.
Anyway, in case you missed it (really?), crude oil futures surged as much as +10% at the open this week, taking them *very* close to the all-time highs.
The real price series (CPI deflated) in the chart below is perhaps the most instructive or informative visual, in that it shows just how markets can behave during geopolitical shocks (e.g. in the mid/late-70’s and briefly in the early-90’s).
There is no telling how high it can go, or even how long it will stay at these levels… There are a few examples of crude oil prices spiking drastically, and then dropping just as fast. There are also a couple examples of a more drawn-out normalization process (e.g. the post-2008 rebound), or even a “higher plateau” (e.g. the first oil shock in 1973).
As alluded to, this price shock will present significant headwinds to growth (and risk assets). Furthermore, as outlined in the latest report, it’s not just energy either, with metals and agricultural commodities also surging. This is about as challenging a macro backdrop as you could conceive.
Key point: The real price of crude is surging, and the real cost could be huge.
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Topics covered in the latest Weekly Insights Report:
Global Growth Scare: weighing the risks as leading indicators turn down.
Stocks vs Bonds: key indicators for the stock/bond ratio outlook.
Defensive Assets: looking for places to hide...
Equity Sentiment: surveyed sentiment is trending further bearish.
Crude Oil: implications of higher crude oil prices.
Europe Risk Check: check-in on key risk pricing indicators.
Gold Technicals: sitrep on gold following the big breakout.
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Thanks for your interest. Feedback and thoughts welcome.
Head of Research and Founder at Topdown Charts
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