Stocks are bolting higher this morning on the following:
- President Trump says opec could cut 10 million barrels a day…
- OPEC calls for emergency meeting…
- China plans to increase oil reserves…
Energy stocks up 14%, oil itself up 21% as I type…
Makes sense right? I mean, with consumers out of work higher prices at the pump has to be a good thing, right?
Well, other than the prospects for folks paying more at the pump, it does make some sense that traders are bidding stocks higher on the news.
You see, the energy industry is today big in America (employs 10 million people), and, alas, it became that way on a tidal wave of cheap, easy money. I.e., it holds a good portion of the troubled debt I’ve been writing about for months. In fact, the sector realized the highest default rate on junk debt in 2019; when the economy was supposedly in great shape (wasn’t our assessment btw).
So, yes, the prospects for higher oil prices could be something that would have traders bidding up stocks right here. Problem is, the energy space was becoming a huge problem even before the start of what is virtually certain to be the deepest recession in modern history…
So, while this could help at the margin, no, this is not the kind of news that’ll take us out of the woods and off to the races just yet…