The Whole World’s Talking About Iran & Oil
Wow! Was last week something or what? We started with the most exciting college football game in years (our Director of Marketing, Nick, still hasn’t shut up about Alabama winning), continued with a significant market correction, lost some great musicians and actors towards the end of the week, saw a short-lived international hostage situation, and finished with a pair of rhetoric-filled political debates. That’s a lot of excitement for anyone to take in!
So, looking back, this week the language went from “how deep will this correction be” into “is this a correction, or is this something worse?” And while a lot of the pundits on TV are drawing correlations to the August 2015 drop, some are heading towards darker territory and bringing up 2008 and 2009. No fun.
Two important things happened last week that may have some bearing on current conditions. First, the majority of Iranian economic sanctions were lifted upon their fulfillment of some of their nuclear cessation conditions. In the short term, we’ve seen Middle Eastern markets panic as supertankers of Iranian oil get ready to hit the markets to further drop the price on already-low oil prices. In the long term, we can expect to see decreased oil production and potential market upsets in domestic markets where 1) crude prices are lower because of a lower quality oil being produced and 2) lower demand & production produces layoffs.
On the upside, it just became a lot cheaper to heat your house this winter. And you’ll likely need it, we got our first snow last weekend and they’re calling for more for tomorrow and Sunday! Are you ready?
The second big event from last week involved the VIX. The VIX?? It may sound like an Old City nightclub where a cocktail costs more than the cab ride, but the VIX is the volatility – or fear – index. It’s a percentage listing of how much the S&P may fluctuate, up or down, in a given year. Traditionally, when the S&P goes up, the VIX goes down.
Right now, the VIX is up, and what’s important from a historical perspective is that it’s above the price of oil. When there’s a flip, and VIX is higher than oil, that’s often a sign that we’re nearing a floor and a turn is coming. Most of the folks that are talking about this can’t help but mention the last time this happened. When was it? You guessed it… 2009.
Is this an accurate prediction? Is good news ahead? Who can say… but it’s definitely a troubling time for a lot of folks. If you have questions, concerns, or want to swap some risk and potential gains for something a little more predictable – give me a call at 215-657-9200. We’re here for you no matter what you need.