The tweet says it all.
A problem with the president’s logic is that crude oil is part of the cyclical, risk ‘on’ macro amalgam. The Saudis did not decide to let prices fall. Prices are falling. Period. Whatever manipulations the Saudis may or may not have attempted have limited efficacy. What, they drove oil down to $34 (WTI) in 2009 and $26 in 2016? I don’t think so.
The facts are that the recent top in crude oil coincided with the top in the S&P 500…
…and it came from a resistance zone we have had in play for years.
Side notes: Back when the Good Ship Lollypop was impaired by Obama era fiscal policy (and the Fed was over compensating with experimentally loose monetary policy) the S&P 500 did not care about crashing commodities. That was the Goldilocks environment, kicked off by the Fed (ref. Op/Twist and the flattening yield curve) and sustained by the improving economy, post-2012.
But now that we are running on Trump era stimulative fiscal policy – reflationary policy – commodities like oil are supposed to correlate positively with industrial growth and a positive economic cycle. Either Trump is throwing spaghetti against the wall to see what sticks (and can be touted) or he does not understand the dynamics in play during a (his own) fiscal reflation.
The fact that this reflation was overlaid on top of the previous monetary inflation – that was never resolved – is what is dangerous about the current situation. Whether he knows it or not, Trump should not want to see oil prices drop appreciably lower.
Okay, off to Thanksgiving.
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