This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.
Otherwise, enjoy the column!
Subscribe to The Market Chronicle to get the Daily Monster Market Commentary and join the 2,892 subscribers getting it for FREE!
Oil To $75, Inflation and Yields To Rise – 2018 Predictions 5,6,&7
Oil will rise in 2018, and that will cause inflation to rise, and that will cause the long-end of the yield curve to breakout and surge. That brings us to prediction 5,6, and 7 for 2018.
7. Oil will rise to roughly $75 per barrel in 2018, a rise of just over 30 percent.
6. Inflation will increase to 3 percent in 2018 on a year-over-year basis on the Consumer Price Index.
5. 10-Year Yields rise to 3 percent.
As Oil goes so does inflation, and as inflation rises so do yields. It starts with the charts, and we can see that Oil has been consolidating sideways now since mid-November, and is being to look like a coiled spring just waiting to pop. The initial pop higher in Oil likely takes the price to resistance at $61.50.
From there resistance is hard to find, until about $75, on the longer-term chart.
Subscribe to the The Market Chronicle to get it Daily and join the 2,892 subscribers getting it for FREE!
One can see in the next chart the correlation between the price of Oil and the direction of inflation over the past 10-years. Should Oil continue to rise, it would drag the CPI higher along with it, and that could cause the CPI to grow to nearly 3 percent on a y/y basis.
10-Year Treasury yields have done a fantastic job historical of predicting the future direction of inflation, as the chart shows, and if Oil starts its rise, and inflation starts its climb. Then surely longer-term yields have only way to go, higher.
The rise in yields may have already begun on the 10-Year Treasury. Yields have already moved outside of a nearly 25-year down-trend as noted in the chart below.
A breakout would take the 10-year treasury yield right to resistance at 3 percent.
Setup For 2018
Things are lining-up going into 2018 to see more inflationary pressures and higher interest rates. But don’t fear, the stock market likely will not to worry too much, because historically rates are low, and rising oil, inflation, and yields would likely be viewed as a result of strong economic growth.
But stocks are already starting to price this potential, just look at the directions of the financials and utilities in the chart below. The contrast couldn’t be more clear.
10 Predictions For 2018:
The purpose of the 10 predictions is for fun and to think about the year to come. It helps to organize thoughts and think about potential themes and trends that could develop. See our 10 predictions for 2017 and judge for yourself how we did.
We offer a lot of great commentaries all week talking about the major and relevant market events. Be sure to subscribe to get all our free commentaries sent directly to your inbox or follow us on Twitter.
[vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern”][vc_column][vc_tweetmeme type=”follow” follow_user=”michaelmottcm” show_followers_count=”true” large_button=”true”][/vc_column][/vc_row]
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.
© 2017 Mott Capital Management, LLC. Use, publication or reproduction in any media prohibited without the permission of the copyright holder.
Tags: #oil #inflation #treasuries #yield #3%