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The World Economy And You

December 13th, 2015

There are many factors that play into the market on all ends, from holidays, to manmade and natural events; there are many variables that can affect you and your investments. To know weather your investments will be safe or not it is vitally important to know these variables and recognize how if at all they will affect you and your investments.

One of these variables is the recent flux of unseasonably warm weather all across the country. When the weather is increasingly warm outside of season it decreases the use of crude oil as an energy source. Because of the recent weather the US oil inventory is dipping slightly as the prices of oil reach the lowest level since 2009. This past week the amount of oil barrels kept in storage decreased by 3.6 million from last week, which isn’t much relatively speaking. Because OPEC was unable to reach an agreement on curbing production, its members will continue to pump at a record pace supplying oil that is not being used. Because of this the price of energy is going to likely remain lower for a longer period of time. Unfortunately because of this, energy companies such as Chesapeake are going to be cutting their payouts, which is going to drive their stocks down, along with equity indices.

Aside from this Chinas economy is not seeing a very bright future at this point in time based on the speed of its economy and the value of the Yuan. The Chinese economy has used over $200 billion in dollars of foreign reserves to prop up their currency. Without doubt that Chinese officials are trying to up exports by dropping the value of the Yuan. The top question and concern, is exactly how far will the Yuan fall before currency traders decide to bail on it altogether. This is also disconcerting, considering the fact that stock prices have slid with the Chinese currency. This is because of the fact that many US manufacturers do business there. Also this could depress inflation due to the fact that Chinese goods are cheaper compared to a strong US dollar. This could cause the Fed to hold off on raising the rates out of fear of a low inflation. In this case, those saving and looking for interest will not benefit as much as those with mortgages tied to base rate moves.

Overall a lot of foreign goods from just about anything made in china to most all of energy and oil costs , are going to be considerably less expensive. Aside from this there might not be much profit in the business of saving if the Yuan continues to fall, holding the Feds finger off the rate trigger. To find out if your money is exactly in the right place that fits you and your needs, contact your David Ortiz, registered investment advisor, today.