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Critical information for the U.S. trading day

Is oil getting ready to surprise investors?

The waiting game over just what economic and other plans POTUS has up his sleeve has been slowing this stock market to a painful crawl.

Of course, some will tell you all that uncertainty may eventually be good for stocks. But while we’re waiting for President Donald Trump to get stock investors excited, or really scared, it’s worth keeping an eye on other assets, which have triggered volatility for equities in the past.

That brings us to oil — one asset that should never go ignored by investors too long. Our call of the day comes from Raoul Pal, founder of Global Macro Investor. He says it’s time to buck the big-money trend and short oil, because those who produce the black stuff think the price right now really should be at $30.

Pal’s call comes after the latest weekly Commitment of Traders report from the U.S. Commodity Futures Trading Commission (ending Jan. 17) showed hedge funds and other money managers placed more bullish oil positions than any week since 2006. That’s as actual producers upped their short hedges to the highest level since 2007, in a bid to lock in higher prices. (Check out chart of the day in Monday’s Need to Know)

No one can deny the magnificent rally — roughly 65% — that crude has seen over the past 12 months. But cheers over the post-OPEC output-cut deal are dying down as U.S. shale producers seem ready to pick up the slack. Analysts at Bank of America Merrill Lynch are warning that oil prices in local currencies are nearing 2014 levels, and that could cut into emerging-market demand growth.

Protectionist policies from Trump and the U.K. could also hold back global trade, and hence curb oil demand, those analysts say.

Then there’s the expectation by some that Trump will introduce measures to support the U.S. oil and gas industry, and wean the country off foreign suppliers. Rising U.S. supply, of course, will lean on prices in the coming month, Commerzbank told clients, adding: “In view of the record-high optimism exhibited by speculative financial investors, we see a risk of falling prices.”

The dollar DXY, +0.05% tumbled, then recovered, on comments from Trump’s Treasury pick Steven Mnuchin. The British pound GBPUSD, -0.0639%  fell after the U.K. Supreme Court said Prime Minister Theresa May needs to consult lawmakers before beginning the Brexit.

Gold GCG7, -0.66%  finished lower, and oil prices US:CLG7

European SXXP, +0.25%  markets are up, and Asia equities ADOW, +0.30%  ended broadly higher even after the U.S. pulled out of the Trans-Pacific Partnership.

Investors shouldn’t completely shun bonds right now, says Glenmede’s director of investment strategy, Jason Pride.

“Investors may get the urge to sell bonds in this environment, but shouldn’t give up on the asset class as they provide a good counterbalance during equity market selloffs,” Prides says in a weekly note.

But not just any old bonds, says Pride: “When rates are low and yield is scarce, investors should employ for a portion of their allocation a more opportunistic strategy that is not constrained to investing in the traditional fixed income securities that carry low yield and higher interest rate sensitivity.”

Source: marketwatch.com

Critical information for the U.S. trading day

Is oil getting ready to surprise investors?

The waiting game over just what economic and other plans POTUS has up his sleeve has been slowing this stock market to a painful crawl.

Of course, some will tell you all that uncertainty may eventually be good for stocks. But while we’re waiting for President Donald Trump to get stock investors excited, or really scared, it’s worth keeping an eye on other assets, which have triggered volatility for equities in the past.

That brings us to oil — one asset that should never go ignored by investors too long. Our call of the day comes from Raoul Pal, founder of Global Macro Investor. He says it’s time to buck the big-money trend and short oil, because those who produce the black stuff think the price right now really should be at $30.

Pal’s call comes after the latest weekly Commitment of Traders report from the U.S. Commodity Futures Trading Commission (ending Jan. 17) showed hedge funds and other money managers placed more bullish oil positions than any week since 2006. That’s as actual producers upped their short hedges to the highest level since 2007, in a bid to lock in higher prices. (Check out chart of the day in Monday’s Need to Know)

No one can deny the magnificent rally — roughly 65% — that crude has seen over the past 12 months. But cheers over the post-OPEC output-cut deal are dying down as U.S. shale producers seem ready to pick up the slack. Analysts at Bank of America Merrill Lynch are warning that oil prices in local currencies are nearing 2014 levels, and that could cut into emerging-market demand growth.

Protectionist policies from Trump and the U.K. could also hold back global trade, and hence curb oil demand, those analysts say.

Then there’s the expectation by some that Trump will introduce measures to support the U.S. oil and gas industry, and wean the country off foreign suppliers. Rising U.S. supply, of course, will lean on prices in the coming month, Commerzbank told clients, adding: “In view of the record-high optimism exhibited by speculative financial investors, we see a risk of falling prices.”

The dollar DXY, +0.05% tumbled, then recovered, on comments from Trump’s Treasury pick Steven Mnuchin. The British pound GBPUSD, -0.0639%  fell after the U.K. Supreme Court said Prime Minister Theresa May needs to consult lawmakers before beginning the Brexit.

Gold GCG7, -0.66%  finished lower, and oil prices US:CLG7

European SXXP, +0.25%  markets are up, and Asia equities ADOW, +0.30%  ended broadly higher even after the U.S. pulled out of the Trans-Pacific Partnership.

Investors shouldn’t completely shun bonds right now, says Glenmede’s director of investment strategy, Jason Pride.

“Investors may get the urge to sell bonds in this environment, but shouldn’t give up on the asset class as they provide a good counterbalance during equity market selloffs,” Prides says in a weekly note.

But not just any old bonds, says Pride: “When rates are low and yield is scarce, investors should employ for a portion of their allocation a more opportunistic strategy that is not constrained to investing in the traditional fixed income securities that carry low yield and higher interest rate sensitivity.”

Source: marketwatch.com

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