With Trump’s announcement to leave the Iran deal, all eyes are on the oil market and how it will react. Additionally, China and the U.S. plan to talk through trade deficits. Read on to get the details…
Oil Prices on the Rise – Crude oil prices surged above $70 this week, with a final push coming after President Trump’s announcement to leave the Iran deal. Looking at just the price of a barrel, one might assume that restoring sanctions on Iran is a significant event as it relates to total supply of oil, but in reality, it is probably not as important as many think. For one, the U.S. has not imported any oil from Iran since 1992.1 Additionally, restoring sanctions will not necessarily impact Iran’s trade with the European Union, Russia, and China – all of which remain in the deal. Restored sanctions should impact Iran’s economy in other ways, and also possibly impact our trading relationship with allies. But, there shouldn’t be a big disruption to oil markets, in my opinion. Meanwhile, gasoline prices are also feeling pressure as summer approaches. Gasoline futures on the New York Mercantile Exchange rose as high as $2.169, touching their highest levels since late August, when Hurricane Harvey disrupted nearly a quarter of U.S. refining capacity. According to AAA, the average price at the pump is now about $2.83, with drivers in nine states paying $3 a gallon or more for regular gasoline.2
Road to Nowhere? Slight progress is being made, but trade talks remain tense with China as both sides posture in hopes of avoiding any escalation to a trade war. On the U.S. side, negotiators are requesting that China reduce its trade deficit with the U.S. by $200 billion by 2020, in addition to halting all government support (subsidies) for advanced technologies. According to a report in the Wall St. Journal, Chinese officials see the proposal as “unfair,” but nevertheless see enough wiggle room that they plan to dispatch their chief economic envoy, Liu He, to Washington in the coming days/weeks. Mr. Liu is expected to bring proposals for how to reduce the trade deficit. Both sides would be wise to work through the issues sooner rather than later, as the tensions are already affecting trade flows between the two countries.3
Jobs Market Keeps Getting Firmer – the U.S. labor market continues to grow stronger, as total nonfarm payroll employment increased by 164,000 in April. The unemployment rate now sits at 3.9%, which, as I see it, is about as tight as a job market will ever get in the country. Job gains occurred in professional and business services, manufacturing, health care, and mining.4
Going Green – California became the first U.S. state to require solar panels on nearly all new homes built after January 1, 2020, as part of new energy efficiency standards adopted by the California Energy Commission. The decision marks a win for the solar industry (and arguably the environment), but the economics are slightly more challenging. Some estimate that it could increase the cost of buying a house by $8K-$12K, in a market where housing prices are already steep. Meanwhile, California’s GDP grew 3.4% in 2017, pushing it over the $2.7 trillion mark. California’s economy is also quite diverse, from Silicon Valley to private equity to Hollywood and agriculture. All told, California is now the world’s 5th largest economy, surpassing even the U.K. in size. 5
While we may not know how these stories will pan out, or how they could affect the market in the long-term, knowing your net worth can be critical to your financial well-being and can help you prepare for what’s ahead.
Calculating your net worth may give you a better idea of where you stand in terms of your long-term investment goals. If you do not currently know your net worth, then now may be a great time to calculate it. To help you understand how to measure your net worth, download our guide Measuring Your Net Worth.6 Simply click on the link below to get your copy today!
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