Now that oil is slightly north of the $60 level what next?
.......Corporate profits are already showing signs that the high growth levels of the last 2 years cannot and will not be maintained, in some cases they are already falling. The central banks will come to our aid with cuts in interest rates but they will be too small to cushion the impact of high oil prices. Some might believe that shares currently offer good value (that is a side issue and a debate that could rage for a long time), what is unquestionable is that once profits fall, valuations will have to fall to reflect this and we all know that lower valuations mean lower equity markets.
That is not to say that money will not be made but it means that the long only traders will have to be more discriminating in their selection of trades and stay closer to the markets. Companies, sectors and stock markets that are adversely impacted by oil should be avoided where possible unless one is trading them on the short side. Money will be made and lost in large quantities and many companies and individuals will go under by the time this runs its course.
Happy hunting.