On this morning’s Trey Ware show, Karl discussed how higher oil and gasoline prices are going to affect the economy this summer.
Trey Ware: Underpinnings of the economy as we talk about every week in this segment with Karl Eggerss from Eggersscapital.com, are still extremely strong. And it looks like for the most part, even what we have done with trade with China has not been passed onto the everyday consumer, with a so called trade war with China. And we’re now seeing, as was announced again over the weekend, the unemployment numbers, they are the lowest that they have been in 50 years. And the stock market continues to be the highest that it’s ever been in history.
Trey Ware: Karl is now joining me here on the Stephen’s Roofing Newsmaker Hotline. What do you make of all this news, Karl?
Karl Eggerss: Well the oil’s the big news of the day, just like you were mentioning, in this sanction waivers. And so we’re seeing oil this morning up to about $55.50 per barrel, so it’s up 44% year to date. And gasoline is up 38% year to date. So, as we enter the summer season people listening need to understand that they’re going to see gasoline prices go up over the next few weeks, just as they’re entering the busy travel season.
Karl Eggerss: So, you need to budget for that number one. But number two, the big question is because of the economy doing well, and you and I have been talking about people finally starting to get some raises, and wages going up a little bit, can those increases absorb these increases in gasoline prices? Because that’s going to be a big expense for people coming up in the summer driving season.
Karl Eggerss: But part of the reason, not only is it supply and demand that pushes up oil prices, but the demand part of it is because the economy is doing so well. That’s another reason why oil’s going up. So, it’s a good thing and it’s a bad thing. We don’t like it to go up, but if oil’s at $26 a barrel, like it was during the great recession, you’ve got other major issues going on.
Trey Ware: That’s exactly right.
Karl Eggerss: The fact the oil’s at $55 is because the economy is doing well. These sanctions obviously are giving it another bump today, so let’s watch that. But the other thing you mentioned is China, and that’s huge, because China had been slowing down pretty dramatically. And now we’re starting to see some numbers in the last few weeks that are starting to tick up a little bit. And so we think maybe China’s growth slowed down has slowed itself. So, we might see an acceleration in their growth, which again is good in the big picture because as China grows, people say as China sneezes, the rest of the world gets a cold. And there’s a lot of truth to that with the US and China and their economies.
Trey Ware: Well, yeah, it they rebound and they’re able to pull themselves out of the slump that they have been in, keep in mind even with the slump they have still been in the six’s for GDP growth. So, they have still had some pretty solid growth. But that means the rest of us are going to do well, because they buy so much from us. But we’ve got some good numbers on leveling the playing field on the trade and balances that came out last week as well. And so that playing field begins to shape up better for the United States too. And it looks like the new agreement between us, and Canada, and Mexico is beginning to generate some more dollars, about $65 billion into the US coffers just last month based on what the changes have come from the former NAFTA, not called that anymore.
Trey Ware: So, we’re starting to see some, I think rearranging of the world economy if you will. And more in the favor of the United States, instead of us getting punched in the nose all the time. And everybody looking at the US of A as the great bank for the world. It looks like things are beginning to turn around a little bit, and that’s good news.
Karl Eggerss: Well, absolutely. And from an investment standpoint, people listening need to understand you still have to have a diversified portfolio in terms of owning international stocks.
Trey Ware: Oh yeah.
Karl Eggerss: … Chinese stocks, the Chinese stock market is up over 30% just in 2019, which is beating the US. So, you have to diversify, because look, there’s a lot of countries that even though they’re having some issues, their stocks are selling very, very cheap. And so any little bit of good news you can make a lot of money in international stocks. So, don’t abandon the US by any means, but certainly what I see usually is people have way too much in the US because it’s done so well. So, this is the time to step back and say, “Okay, let me look at the big picture and take advantage of what’s cheap, and maybe take some profits on what’s been really good and what works.”
Trey Ware: Yeah, spread yourself out all over the place is a good idea. All right, Karl, thank you. Eggersscapital.com, Karl Eggerss every Monday at this time.
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