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The world seems to be unraveling like the irrational yet disturbing riots happening in London…
The Monday newspaper headline said it all; “Pure fear grips global markets” and a recession may be just around the bend. The media is compounding the hysteria. In over 30 years of watching the energy markets, I have not seen this magnitude of blind fear and irrational thinking turbo charging volatility in the markets. In one hour the markets are up and the next hours they cascade down. This volatility has been exacerbated by investors using computer programs (algorithms) to monitor markets and automatically buy and sell without human intervention. This volatility may become the new norm.
The end of last week and the beginning of this week was reminiscent of the preliminary flash crash bash and temporary market rebound we all endured at the beginning of the great recession of 2008. On Monday panic and nauseating fear consumed the psyche of investors when Standard & Poor’s announced they were downgrading the U.S. government’s credit rating to AA. Investors sold equities and most commodities including oil, based on expectations for significantly lower demands and bought into the safe haven of gold elevating its price to new record highs. This was an extremely exaggerated reaction by investors because taxes and revenues flowing into the U.S. Treasury for August will cover debt obligations six times over.
By: Roger McKnight, Senior Petroleum Advisor
What does it all mean for Canada? And what else is driving all this fear and doubt? Find out in this week’s Energy Report. For subscription rates, email us at info@en-pro.com.