Daily Capital

Oil Prices Continue To Fall As Stocks Remain Strong

Market Digest – Week Ending 11/14

Capital markets were quiet this week. Global stocks traded in a narrow range and finished little changed for the week. Oil prices continued to plummet, sending domestic crude below $75 a barrel for the first time in four years. Many analysts predict supply will start to be curtailed if prices drop below $70. Relations between Russia and the West deteriorated amid reports of new Russian troop and equipment movement into Eastern Ukraine. Q3 Eurozone GDP was again soft, but exceeded expectations and had little impact on markets.

The Tool To Beat

Weekly Returns:

S&P 500: 2,040 (+0.4%)
FTSE All-World ex-US: (+0.9%)
US 10 Year Treasury Yield: 2.32% (+0.02%)
Gold: $1,189 (+1.5%)
USD/EUR: $1.252 (+0.6%)

Major Events:                 

  • Monday – China announced a “Shanghai-Hong Kong Stock Connect” program which will allow greater access for international investors to its stock market.
  • Monday – Bill Gross’s new fund at Janus attracted $430 million since his arrival, less than 1% of the outflows from PIMCO.
  • Monday – The US Postal Service said up to 800,000 people could be impacted by a systems breach which may have compromised names and Social Security numbers.
  • Tuesday – China and the US reached a number of accords on environmental issues, tourist visas and increased communication to avoid military tensions.
  • Wednesday – NATO said Russia is sending new troops and tanks into Ukraine.
  • Thursday – Six banks, including Citigroup and JP Morgan agreed to pay $4.3 billion related to currency trade manipulation allegations.
  • Thursday – Baker Hughes confirmed it was in preliminary talks to be acquired by Halliburton.
  • Friday – Eurozone GDP grew at a 0.6% annualized rate in the third quarter, modestly ahead of expectations.

Our take:

In springtime, when the crisis in Ukraine flared up and Russia began the process of annexing Crimea, stock markets were highly reactive to events in the region. Over time, investors seem to have concluded Ukraine is not important. Recent reports of Russian troops and tanks filing into Ukraine have had little impact on stocks or Treasuries (which earlier in the year had acted as a safe-haven and rallied when fears of conflict spiked).

Things are not going well in Russia. The plummeting price of oil is hurting the country badly, and earlier sanctions are not helping either. The Ruble has declined by 30% relative to the dollar, which could mean rising prices for ordinary Russians. Whether this leads Putin to act more conservatively or assertively is completely unknown.

World leaders from the G-20 meet this weekend in Australia. Ukraine is expected to be largely avoided as a topic, but Putin may force the world to refocus attention there before long. An invasion of Eastern Ukraine seems increasingly likely. If it happens, we’d expect markets will take notice. This isn’t reason alone to abandon stocks or load up on Treasuries, but the calm which returned to markets this week may be short lived.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Craig Birk, CFP®
Craig Birk leads the Personal Capital Advisors Investment Committee and serves as Chief Investment Officer. His focus is translating improvements in technology into better financial lives. Craig has been widely quoted in the Wall Street Journal, Bloomberg, CNN Money, the Washington Post and elsewhere. Prior to Personal Capital Advisors, he was a leader within the portfolio management team at Fisher Investments, helping assets under management grow from $1.5 billion to over $40 billion. Craig graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.

You can take control of your money. We’re here to help.

Sign up for our Newsletter to get tips from our financial experts.

Must be a valid email address
Icon Close

To learn what personal information Personal Capital collects, please see our privacy policy for details.