As oil prices continue to slide to even lower lows, market strategists are beginning to wonder when the fallout will begin to make itself known in earnest in oil-producing nations.
Large oil producers like Canada anticipate some economic pain from an oil price that has dropped by more than half in six months to its lowest since 2009, after demand was crushed by the global financial crisis. Many smaller producers like Venezuela are already feeling the pinch.
The hedge fund industry is on track to finish out the year both with record assets and a huge chunk of fund closures. Of the 240 funds launched in the third quarter 200 were liquidated, according to data from Hedge Fund Research. Year-to-date through September’s end, there were 814 launches and 661 liquidations, HFR data showed.
All this as funds have record assets under management, some $2.8 trillion.
That does not bode well for an industry whose management fees are under rotating, if constant scrutiny. This culling process is nothing more than natural selection, Don Steinbrugge, managing partner of Agecroft Partners told the Global Markets Forum on Thursday.
Sell, baby, sell: Sinking oil prices among global headwinds into 2015: Canadian fund manager, US economist
The rout in oil will have wider reaching consequences yet.
The Organization of Petroleum Exporting Countries’ decision not to cut production amid slowing demand coupled with large increases in U.S. oil output has skimmed some $40 off a barrel of oil inside of five months.
The impact of low oil prices is already being felt among large exporters of the fuel who rely mostly on that revenue. Canada is suffering and sinking oil prices may yet keep its neighbor to the south in a holding pattern.
The Dow Jones Industrial Average hit a record high for the third straight day this week. The S&P 500, since breaking the 2,000 level on Oct. 31 has since remained above that level.
Expect this as the new normal, at least for this decade, David Kotok, chairman and chief investment officer of Cumberland Advisors told the Reuters’ Global Markets Forum on Wednesday.
NEW YORK, Dec 2 (Reuters) – Energy hedge fund AAA Capital
Management Advisors will shut its doors and return investor
money at the end of the year as traders continue suffering
lackluster returns amid a structural change in energy markets.
A. Anthony Annunziato, the fund’s president, said on its
website after 17 years of managing money, “I have decided to
return investor capital and retire from the asset management
industry by the end of 2014.”
The shale oil boom in the U.S. may top media headlines over the holiday shopping blitz this day after Thanksgiving in the U.S.
The Organization of Petroleum Exporting Countries (OPEC) on Thursday decided to leave oil output unchanged at 30 million barrels per day. This decision comes as demand falters and global growth forecasts into next year remain tepid, which will push oil demand lower.
Oil markets made history this week as Brent crude prices dipped below $78 to a four-year low. This comes ahead of a meeting by members of the Organization of the Petroleum Exporting Countries on Nov. 27th. Up for debate is whether or not Saudi Arabia, OPEC’s largest producer, will decide to cut production.
The outcome, while perhaps more subtle than a global oil price rout, will be no less impactful. Saudi Arabia has been accused of engaging in a price war of sorts, purposefully keeping output high to flood the market, drive prices lower and make it uneconomical for producers to drill. This is something the Saudi oil minister denied this week.
Friday’s jobs report was something that the market could take in stride and the U.S. Federal Reserve could breeze over in its interest rate policy plotting. Even as the unemployment rate sank to a six-year low, wage growth remains stagnant. Wage growth has to become more robust and consistent before the Fed embarks on raising interest rates, most analysts agree.
The U.S. economy added 214,000 jobs last month, lower than the expected 231,000 in a Reuters’ poll but above the 200,000 mark for the ninth consecutive month.
Volatility has cooled for the moment, even as the U.S. Federal Reserve lifted its quantitative easing program on Wednesday, but Europe, China and Brazil are still concerns for financial markets, according to a veteran investment manager.
On Wednesday, the World Bank urged China to cut its growth forecast next year. Brazil’s stock market is still recovering from a sharp post-election sell off on Monday, and Europe’s financial sector needs some fine tuning.
A dip in 30-year mortgage rates to their lowest level in more than a year and stronger U.S. housing data on Friday appeared to be the green shoots of the next phase of U.S. economic recovery, that being the housing market.
U.S. housing starts were up a whopping 6.3 percent in September. Together, the mortgage and housing data seemed to suggest a housing recovery. That, in turn, fits neatly into the U.S. Federal Reserve’s initial timeline for ending its asset buying program this month, even as the number of sales of previously owned homes disappointed on Monday.