Software & Finance - Monthly Magazine Online

Volume 2 - Issue 4

April 2012

April 2012 - Economics - Rising Gas Prices a leading indicator for market crash?

Here is the article on Economics - Rising Gas Prices a leading indicator for market crash.


Mar 16, 2012 - Oil prices have been trading more than 100.00$ consistently for the last one month. Besides stock market have been out performing with significant gains by pushing S&P 500 up by 15% year to date. Nasdaq has crossed by 3000 points and trading at more than 10 years high point.


People have been thinking that since the stock market has recovered, economy is doing good. But it is true, still the fundamental problems of housing crisis is not yet solved. Mainstream media did not give importance to rising dollar and interest rate. Rising dollar will damage the technology sector earnings. Rising interest rate will damage the home buyers's interest on buying home and increases the pressure on seller. We will notice a significant drop in weekly mortgage applications along with home median prices doing down.


People who are not into investment are huge at percentage. They do not like to see increasing the gas prices. They will tighten their wallet by cutting down their expenses.


Still Fed is keeping the interest rate down by near zero. However sell off in treasuries is pushing the interest rate up. Fed has no way except to rise the interest rate. Fed strategy of QE3, QE4 by keeping the long term rates low and pushing the short terms rates up will drive interest in foreclosures.


As 2012 is as election year, stronger dollar policy would be in place to reduce the oil price. With the current situation, we will see market bottoming around election that time everything will go down except US$. USD is the safe-heaven now. You may also consider investing into gold around election time since it will bottom during that time.