Tick Tock: The Fed Cuts Rates, Markets Rally, and Oil Wobbles – Navigating Uncertain Times
Yay…we did it. The Fed cut interest rates by a robust 50 points last week. It was the first rate cut since March 2020. Does anyone even remember 2020 anymore? The Fed is now satisfied that they have inflation in a hammerlock and are “recalibrating” to support the labor market and economic growth. To that end, they see a long term path of rate cuts through at least 2026. The Fed sent an unmitigated message to wary investors that it was going to do whatever it takes to support economic growth. Gentlemen, start your engines. The Dow ended up hitting 42,000 for the first time in its history, the S&P 500 scored its 39th record close of the year, and the YTD gains for the Nasdaq Composite also returned to 20%, fueled by a rally in tech. The economy is a disaster? Hmmmm. As long as corporate earnings continue to project unicorns and rainbows, it will be difficult to turn away from the braying bulls.
The commodities story is a bit more bearish. There is growing concern that demand may be fading due to signals coming from the Chinese economy. Furthermore, there is more and more talk of oil supply waiting in the wings that has yet to be released to the market. Though OPEC+ decided to postpone their production rate cuts until December, this seemed to have very little bearing on market sentiment. Indeed, for the first time in a long time, money managers are actually short Brent crude. Macquarie lowered its Brent and WTI oil forecasts for the rest of the year and Morgan Stanley also lowered its price forecast, citing demand as a concern. Oil prices did have a second straight week of gains, perhaps propped up by the rate cut. Brent finished the week at $74.49 and WTI started Friday happy hour at $71.92.
Remember, oil won’t move from A to B unless it’s worth more at B than it is at A. Inventory hawks are keeping a close eye on Cushing, where oil levels are down in 10 of the last 11 weeks. At 22.7 million barrels, it’s the lowest level in 12 months. While the reason for this might be multifaceted, one new variable is the Trans Mountain pipeline which has been sending Canadian production away from the Gulf Coast to the tune of 400,000 barrels per day. Buy straw hats in the winter they say, as summer will surely come. As a reminder, The Tank Tiger is working closely with Cushing storage – both direct to the terminal and via sublease – so it’s a great time to check with us to get a storage price you can brag about. Let us know, and we’ll get right on it.
Speaking of time, some people like to wear a watch and set their time 5 minutes fast, that way they can never be late. Others don’t like wearing a watch because, like the band Chicago says, does anyone really know what time it is? Sure, we have clocks and stop watches on our phones, but it’s easier to glance at your wrist than to pull out your cell on a busy street. However… this can conversely be a reason that people avoid wearing watches. Continually feeling time pressure can be negative and stressful. If you don’t know the time, you can never be late. The Rolling Stones said, Time is on my Side – yes it is. We all have time…in fact, it’s the most precious thing we have. Tick tick tick.
