The oil price-stock price linkage seems to have been re-established Monday morning as word of U.S. shale oil cutbacks hits the tape. But is this latest rally for real?
WASHINGTON, Feb. 22, 2016 – Brief column today, as we have much to do away from our computer screen. That said, however, Wall Street is enjoying another strong relief rally today with all major averages up well over 1 percent in fairly active, bullish trading.
What’s making a difference this Monday? Simple: The linkage of oil prices to stocks seems to have returned, at least for a day. West Texas Intermediate is up over 6 percent as of 3 p.m. EST, perched at an encouraging $31.43 bbl. after topping the $32 mark earlier, sending stocks off to the races at Monday morning’s opening bell.
The usual news has been sloshing around in background, including the ongoing back-and-forth between Apple (symbol: AAPL), the FBI (symbol: FBI) and the courts; China’s monetary and interest rate dilemma; immigration, illegal or otherwise; the Middle East; and any other really depressing thing you can think of.
With the Dow up well over 200 points right now, we’re feeling a little bad that our portfolio is right at the flatline. But that’s because we’ve loaded it with a large cash position plus decently conservative, mostly dividend-paying companies that seem relatively safe in a storm.
In truth, pretty much the entire universe of stocks, including those dividend-payers, will dive for the bottom in a bearish market environment. It’s just that those paying a decent dividend will tend to go down slower and go down less. And again, remember, the game in a bear market for a conservative investor is to still extract some income while losing as little as possible.
Traders can make hay with short sales, of course. But if you don’t have the time or the ability to sit in front of your computer all day, conservative and boring is the way to go.
Even so, that means that on an irrationally exuberant day like today, you get to sit there and watch all the kamikaze traders make big money. It’s frustrating. But as Aesop once told us, “Slow and steady wins the race.” We agree, although we’d add “usually” to the end of this moral.
We’ve bought a few small international ETFs at the suggestion of one of our investment services. But aside from that, we’re in and out running neglected errands today. It’s too early to get excited yet, so let’s just see if today’s bullish action has any legs at all. Call it “watchful waiting” if you wish. No point in chasing hot stocks when they’re rallying.Click here for reuse options!
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