The recent rise in crude oil prices could provide an opportunity for investors since inflationary pressures appear likely to affect the economy for a longer period, Bret Jensen argues.
“Rising energy prices will continue to be a part of the surge of inflation in the economy,” he wrote in a recent Real Money Pro column. “The surge in crude is also an opportunity for investors as well.”
Interest rates are climbing upwards as returns in the stock market are declining in both the broader markets such as the S&P 500 and tech-heavy Nasdaq.
“Investors finally are capitulating that inflation may not be temporary or ‘transitory’,; a theme I have been hammering on for months in these columns,” he wrote. “We saw more evidence of this big surge of cost pressures … as the Case-Shiller Home Price Index rose 19.9% for July, a record for a year-over-year increase in housing prices.”
Rising energy costs are a concern for the economy as consumers are feeling the pain as price surges are occurring everywhere from higher rental prices to homes for sale. Crude oil now is over $75 a barrel and shortages have occurred in the United Kingdom.
“Obviously, this rise in crude prices has been good for the energy sector, which has been one of the strongest parts of the market despite the uptick in volatility in recent trading sessions,” Jensen wrote.
“.... this will be good for the bottom line and capital budgets for energy producers,” he wrote. “This, in turn, should boost the fortunes of oil services names in the quarters ahead.”