Finimize - 📈 Oil's runaway price

What’s going on here?

The benchmark oil price landed above $90 for the first time since October.

What does this mean?

Oil prices have been driven 18% higher this year, beating the Magnificent Seven tech stocks, a result of supply being capped while demand is anything but. OPEC+, the group of the world’s biggest oil-producing nations, has played its part by limiting the number of barrels it sends into the market. The biggest factor has been rising geopolitical tensions in the Middle East, though. The region supplies around a third of the world’s oil, a bounty that could be compromised if the current conflict spreads into other countries. And with serious escalation between Israel and Iran looking increasingly likely, some banks have raised their forecasts recently, with JPMorgan saying benchmark-setting Brent crude oil could reach $100 a barrel.

Why should I care?

For markets: It’s high stakes for stocks.

High energy prices tend to make everything more expensive, meaning oil’s price could be the catalyst that sparks inflation back to life. So if higher prices last, it could become harder for the Federal Reserve to justify interest rate cuts, and in that case, higher-for-longer rates would keep weighing on stocks. Now, investors have been expecting rates to fall, so they’ve been buying stocks and riskier assets in anticipation. But if they’re wrong, they’ll need to readjust – and that could shake up the stock market big time.

The bigger picture: Fail to prepare, prepare to fail.

This could serve as a lesson to never put all your eggs in one basket – especially when the economy, the chief egg-cracker, is this volatile. An “all-weather” portfolio could be a better option, then. That involves blending global stocks, safe-haven treasury bonds, store-of-value gold, and commodities that could benefit from inflation, a collection designed to give you a better chance of benefiting in any economic climate.

What’s going on here?

The US went into overdrive, adding 303,000 jobs in March – the most in ten months.

What does this mean?

The monthly “nonfarm payrolls” report tracks the number of paid workers in the US, excluding those in a couple of sectors like farming. In March, the US added 303,000 jobs, way more than the 200,000 economists expected and even stronger than February’s 275,000. That’s a sign of strength from the US job market, indicating that companies have enough cash to hire and workers are getting money in their pockets.

Why should I care?

For markets: Money, money, money.

The average hourly wage rose by 0.3% between February and March. That’s something of a sweet spot: wages are picking up slightly faster than inflation, but not enough to encourage rampant spending that could provoke another price spiral. That tends to happen when there’s a shortage of available workers, forcing employers to bid against each other by upping their salaries. Now, there could be a risk of that over the long term, since lower birth rates and an aging population look set to reduce the pool of workers. But the US can count on its reputation as the Land of Opportunity to bring in reinforcements: based on last year, around 18% of the country’s workforce was born overseas.

The bigger picture: The bets are off.

Inflation might be moving toward the 2% target, but since the economy is holding up just fine, the central bank won’t have much incentive to cut interest rates. (Remember, higher interest rates make it more expensive for individuals and businesses to borrow and spend money, a combination that can send an economy south.) The jury’s still out: one Federal Reserve official predicted zero cuts this year, while another said they expected three, but traders reduced their bets on any early rate cuts after those hardy job numbers did the rounds.