LET THE GOOD TIMES ROLL

Or at least that is what we thought at the end of January,* but what a difference even a week makes as the stock market is gyrating wildly but in a downward path.  Well, a bad February often follows a good January so maybe what we are seeing is something rather normal.

Though oil is currently in a fall, Goldman Sachs on Thursday [February 1, 2018] raised its 2018 oil price forecasts, projecting that Brent crude will soon top $80, fueled by blockbuster oil demand, a deal among big producers to limit output and U.S. drillers' inability to meet the world's growing energy appetite.

The investment bank now sees Brent, the international benchmark for oil, averaging $75 a barrel over the next three months, up from its previous target of $62. Goldman also raised its six- and 12-month forecasts to $82.50 and $75, respectively.**

Speaking of oil, Wall Street's hopes are high for the energy sector this earnings season thanks to a recovery in oil so far this year. That hope should be validated Friday when industry leaders Chevron and Exxon Mobil are scheduled to report, says BK Asset Management's Boris Schlossberg.

"There's still a little bit of juice left in both plays because they've been such terrible laggards," Schlossberg, managing director of FX strategy, said Wednesday on CNBC's "Trading Nation."***

Energy names have languished alongside crude in recent years as lower prices forced rig closures and ate into oil companies' profit and sales growth. A global supply glut and weaker demand sent oil prices spiraling in late 2014, dropping to a low near $26 a barrel in February 2016.***

Currently, however, both Exxon and Chevron are in a correction.****

Over the rest of the year, volatility may be up, but I suspect the year will end with the markets up, even though the year of off-term elections (such as this year) are traditionally the least good but not always.*****
The presidential cycle. The stock market has, for the most part, ebbed and flowed with the four-year election cycle for the past 182 years. Wars, bear markets and recessions tend to start in the first two years of a president’s term, says The Stock Trader’s Almanac; bull markets and prosperous times mark the latter half. Since 1833, the Dow Jones industrial average has gained an average of 10.4% in the year before a presidential election, and nearly 6%, on average, in the election year. By contrast, the first and second years of a president’s term see average gains of 2.5% and 4.2%, respectively. A notable recent exception to decent election-year returns: 2008, when the Dow sank nearly 34%. (Returns are based on price only and exclude dividends.*****)

Remember even in 1987 when the DJIA and the SandP 500 fell 22% in one day, the year ended up for both about 3%.  Not bad considering.


* https://www.cnbc.com/2018/02/01/best-january-since-1997-bodes-well-for-the-rest-of-the-year.html
** https://www.cnbc.com/2018/02/01/goldman-sachs-raises-oil-price-target-topping-street-consensus.html
https://www.cnbc.com/2018/02/01/a-little-bit-of-juice-left-for-chevron-and-exxon-ahead-of-earnings-says-market-watcher.html
**** https://www.cnbc.com/quotes/?symbol=xom
***** https://www.kiplinger.com/article/investing/T043-C008-S003-how-presidential-elections-affect-the-stock-market.html