More investors are taking advantage of the lock-step between oil and markets
Shrewd investors are using the markets’ recent panic over oil prices to their financial advantage and are reaping the benefits.
With the FTSE 100 having the biggest one-day gain in over five months last week, coupled with European and U.S. markets bouncing back, oil prices and stock markets have had a close association recently, which has caused a unsubstantiated panic mode that led to global sell-offs.
However, as I was quoted as saying in the International Business Times and in Money Observer, amongst others this week, this rally seen in the majority of markets indicates that savvy investors are starting to use the anxiety surrounding oil to their advantage.
Instead of adopting a herd mentality, an increasing number of global investors are now concentrating more on fundamentals and the high quality bargains in equities to top up and diversify their portfolios.
They are recognising the important buying opportunities that are presenting themselves.
As such, a wise strategy at this time would be to invest new money into the markets, as they will soon stabilise in order to show the robust economic fundamentals and, as we’ve seen in the past, equities are one of the best ways to secure real value growth.
Looking at the macroeconomic situation currently, it is, general speaking, fairly positive across the globe. Employment in the U.S., for example, being at 4.9 per cent, means the world’s largest economy is considered to have full employment.
In addition, inexpensive oil can turn out to be extremely valuable. It becomes the buying power of major world economies such as the U.S., Europe, China, Japan and India.
Nevertheless, these significant gains from cheaper oil are more incongruent, driving focus on to the lower losses, making them more easily visible – which is why they are capable of driving markets into an unnecessary frenzy.
Therefore, investors are capitalising on this panic and recognising a likely ‘J Curve’ – a mini market downturn precedes a far larger upturn in the global economy later on.
As such, they are focusing on the generally positive macroeconomic landscape and making the most of the attractive prices in order to enhance their portfolios for the medium and long term.