These Are The Positives I See Developing Thus Far
The US government has
cautioned that the current war will not be the walk in the park that
many assumed it would be. And for the time being, daily price action in the
financial markets will be at the mercy of news developments coming out of Iraq,
creating a significant degree of volatility and choppiness. Trading these
markets can be quite tricky, making profits elusive. As such, investors need to
focus on two things when making their trading decisions: first, what’s been
accomplished by allied forces thus far in the war? And second, what are the
current fundamentals surrounding the US economy?
What’s been accomplished by allied forces thus
far in the war?
Allied forces have been successful at securing key areas, such
as the “scud box” and western Iraqi airfields that previously gave Saddam
the ability to threaten his neighbors with missile attacks. As a result, the
situation has been contained, and a larger regional conflict is less likely to
occur, thus eliminating a significant degree of uncertainty. Oil-producing
countries like Iran, Kuwait and Saudi Arabia, and non-oil producing countries
like Israel will–in all probability–no longer be brought into the fray.
Furthermore, it has been reported that all of Iraq’s southern oil fields have
been secured, and only 10 of these are on fire. These developments are reflected
in the 28.5 % decline in the price of oil from its $40 a barrel highs, and
further victories should continue to weigh on the commodity’s price. Most
importantly, however, is that the price of oil is no longer heading north and
gas prices are leveling off. This will undoubtedly alleviate some of the strains
plaguing consumers and businesses.
What are the fundamentals surrounding the US
economy?
US Fiscal and monetary stimuli are very accommodative,
long-term interest rates are at multi-decade lows, business inventories are very
light and the equity markets seem to be forming a base.
