The U.S. Dollar and U.S. Stocks
The U.S. dollar is rising, and the U.S. market is approaching its old highs. The European market is rejoicing temporarily because Greece has been allowed to carry on without a default. Markets are on edge, and we are at a juncture of world events where several important themes are coming upon us: short-term, the Fed meeting on June 14 and 15, the Brexit vote on June 23, and the U.S. election in November.
We suggest that investors keep an eye on the big picture. Oil and gold will be fine. We suggest that you use dips to buy. We also want to be vigilant over the next few weeks as outcomes of the Fed meeting in June and the Brexit vote will sway opinion on the market’s prospects with regard to U.S. stocks. Already, the expectation of the outcomes of these two events is setting a trend: positive outcomes, made more likely by the fact that British bookies are putting the odds of a “stay” vote by Britain at 80%. This could lead to a good stock market rally over the next few months.
Gold
Gold is in a correction mode which should last for a few more weeks and possibly until September. Gold reacts to anger and distrust of government, and it has risen with these emotions over the last few months. However, gold currently lacks the new waves of distrust and annoyance necessary to propel its outperformance, after its substantial rise since December. Normal price action would be for a few weeks of consolidation and correction to be followed by another wave higher in the fall of 2016.
Oil - We Look For Higher Prices In 2017
Oil also needs a correction, and oil stocks are overbought. The oil price, more than the price of gold and other commodities, is being impacted today by current supply and demand changes. Many prominent commentators are stating that U.S. oil production will fall at a modest rate in 2016. We report that our monitoring of recent U.S. and OPEC production data indicates that the calls for modest cutbacks in oil production are going to prove incorrect. Production cuts in the U.S. are already exceeding expectations. Oil supply is also potentially impacted, as OPEC spare capacity is now at the lowest level in years. We anticipate that supply will be modestly less than expected. We expect oil to rise in the second half of 2016 and in early 2017.
Buy Brazil on dips. Bold investors could use price declines to buy the Russian ruble.