Surprise, Surprise – Oil & Global Geopolitical Showdowns


We have mentioned in past commentaries the surprise turn in US energy production over the last several years. It turns out energy markets aren’t done with surprises as a combination of pressure from Saudi Arabia to reduce oil prices, lower demand at home and abroad, and a variety of other factors has resulted in a precipitous decline in oil prices. Six months ago, crude oil traded near $100. Today (as of January 12th) oil is trading around $46 (source:

This surprise has had a real impact on markets with both winners and losers. You can probably feel the “win” at the pump as your gas bills have likely been cut almost in half. This is a real bonus in US consumer pockets and in the past it has meant good things to our consumer-driven economy.

It may not be a surprise that oil was about to throw us a loop when you consider that commercials were starting to infiltrate CNBC and Bloomberg suggesting that you can buy your own oil well. This reminds me of direct to consumer gold infomercials a few years back. Oil-rich areas of the country and energy-specific stocks will be calculating new scenarios for the future with significant changes to their assumptions. It will take a while to muddle through the winners and losers with the new energy prices, but stock markets have been wary of the decline which has been welcomed by volatility and down days.

Other surprises have been geopolitical in nature. Ukraine-Russia conflict, terrorism in Europe, two Malaysian air tragedies, these just touch the surface of headlines that have touched our psyche and somewhat rattled markets. Studies of market returns after geopolitical events such as wars and military actions have shown that stocks as measured by the S&P can initially dip but typically recover in a short but unpredictable period of time (Sources: Talha Khan, Capital Markets Group; Mark Haefele, UBS, S&P Capital IQ).

Disciplined investors can take advantage of disruptive forces in markets. Maintaining investments and rebalancing offer opportunities to stay the course and buy low while selling high. If you’d like to discuss specific scenarios and events, please don’t hesitate to reach out to your planner or our investment team.

Melissa Joy, CFP®is Partner and Director of Investments at Center for Financial Planning, Inc. In 2013, Melissa was honored by Financial Advisor magazine in the Research All Star List for the third consecutive year. In addition to her contributions to Money Centered blogs, she writes investment updates at The Center and is regularly quoted in national media publications including The Chicago Tribune, Investment News, and Morningstar Advisor.

Financial Advisor magazine's inaugural Research All Star List is based on job function of the person evaluated, fund selections and evaluation process used, study of rejected fund examples, and evaluation of challenges faced in the job and actions taken to overcome those challenges. Evaluations are independently conducted by Financial Advisor Magazine.

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