Libya: What it means for Stocks
A month ago, it was all about Egypt. This time, it’s Libya. The difference between the two is that the Egyptian leader was fairly rational but the Libyan leader is seriously delusion and bordering on the insane. So what does that all mean for stocks?
First of all, Libya has a much larger impact on the global oil market than Egypt. That said, oil prices have skyrocketed to over $103/BBL during the Libyan crisis. Moreover, there’s no end in sight. Moammar Gadhafi is a crazy dictator willing to kill his own people to stay in power. He’ll need to be removed from power, forcibly, for Libya to have it’s independence. The situation is very different than Egypt — where the ruler resigned under pressure from his people and without violence.
Looking at the overall stock market, it appears as if the worst of it is over. Market’s have been beaten down the past 2 weeks on inflationary fears. Oil prices have already breached $103/BBL and yet the market was still able to manage a powerful gain today of nearly 200 points on positive economic data. The focus is shifting towards domestic economic improvements vs the prospects of inflation and rising oil prices. In our media-dominated society, whatever headlines grab the media will sway the markets accordingly. So the more headlines we see about an improving economy vs the chaos in Libya, the better it’ll be for our stock market.
Even so, the media will eventually tire of Libya and shift it’s focus elsewhere. It’s possible that the market may become concerned again with the European debt crisis and completely ignore Libya for a while. Whatever the case, the stock market will get past all this chaos surrounding Libya and focus it’s negativity elsewhere. Also, the Libyan crisis will eventually resolve itself — and when that does, oil price may come back down to the more sustainable $80 level. The market will also get a boost from that as well.
In the meantime, hang on tight. Tomorrow’s jobs report may set the tone for next week of trading and all signs are indicating a modest recovery.
