Rizal Philippines
February 5, 2016
From the Guardian - why low oil prices hurt the stock market?
This post has seen several posts and watched several news at BBC, CNN, Channel News Asia that many stock markets closed lower in 2015, many of the shares being dragged by low oil prices. High prices favor wealth creation and not consumer welfare. Truly, a robust economy does not favor those who have less in life. They are anti thesis. Thus a country with great GDP, would also have poor people because wealth would be concentrated only in the hands of few stockholders, and stock market players?
Some excerpts from the Guardian:
"Why do low oil prices hurt the stock market?
Oil company profits are plummeting, so oil company shares are plummeting, and that is dragging down the whole market.
Oil company profits are plummeting, so oil company shares are plummeting, and that is dragging down the whole market.
Analysts estimate that profit for all S&P 500 companies in total are on track to be down a recession-like 5.8% for 2015. But if energy companies were removed from that figure, S&P 500 profits would be up a very healthy 5.7% for the full year.
That profit drop directly leads to lower share prices that drag down entire indexes. Two of the biggest oil companies in the world, Exxon and Chevron, are part of the 30-member Dow Jones industrial average. Of the 20 biggest share price losers in the S&P 500 this year, 13 are energy companies.
Investors are also selling shares of companies that may have exposure to the oil industry, like certain banks. And the price of oil has now fallen so low that investors are also worried that it could mean global economic growth is much weaker than expected, which could hurt all companies"
