Goldman Sachs: High Oil Won't Kill Stocks
Both the American and global economies have been amazingly resilient despite the surge in oil prices. And that is good news for stocks, according to investment firm Goldman Sachs:
Over the past few months, investor concern has shifted from the risk of a financial meltdown to the risk that the global economy will succumb to stagflation in the wake of soaring commodity prices.... However, our econometric estimates suggest that very little of the weakness in equities can be attributed to either lower earnings views in response to higher oil prices or higher real interest rates. Rather, the bulk of the negative correlation between oil and equities can be explained by the fact that risk aversion tends to increase when oil prices rise. This suggests that fading oil price increases by buying equities can generate profitable trading opportunities. More broadly, past oil spikes have tended to usher in bear markets for equities only when accompanied by a significant decline in economic growth and rising inflation. In the current environment, our baseline scenario sees global inflation peaking in the third quarter of this year, and for global growth to exceed its 25-year average in 2008 and 2009. While this does not mean that equities will necessarily rally from here, it does mean that higher oil prices are unlikely to trigger a deep sell-off in global stock markets.
Tags: prices | stocks | oil | Goldman Sachs
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Reader Comments
I hope they are right...
I hope that the Goldman Sachs view is correct, because Democrats are not only blocking new exploration for oil, but are threatening to take away 68 million acres of oil leases the oil companies already have access to. They are now talking openly about nationalizing the oil industry.
Once they have nationalized energy and medicine, what's next? Manufacturing? Financial services?
Don't believe the 68 million acres scam the Dems are heaping at you. Since the oil companies don't own these acres, there is a clause that states if they don't explore on the lands and find oil on them, they must give back the leases to the government so they can be resold. So, even if the big oil companies don't drill on the lands, the leases can be taken and given to smaller companies to drill there, if they are willing to make the investment. It's a shell game that the Dems are playing now.
And I am with you on them openly stating they want to nationalize the oil industry. If this doesn't wake people up, I don't know what will.
Say What NOW ? DOW went under 8000 this morning 10/10/08
Say What NOW ? DOW went under 8000 this morning 10/10/08
Bunch of gullible kids. What makes you think that after drilling, the oil companies will give you the benefits ? They make much money over the past 8 years but they didn't give any.
Without the Democrat, nationalize banks is one consideration of Paulson, Bernanke and Bush.
Radical Measures May Be In The Wings
Friday October 10, 12:12 pm ET
“I don't wish to spread alarm on the line people but the big issue confronting the market is I'm afraid the health and sustainability of Morgan Stanley (NYSE:MS - News) and Goldman Sachs (NYSE: gs)," Hugh Hendry, Partner and CIO at Eclectica, told CNBC. "It is unimaginable that they can be allowed to go, I suspect that they will be nationalized at some point today or over the weekend," he add.
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