For the past couple of months there has been panic over rising commodity prices. Escalating oil prices were supposed to be pulling us back into recession. Gold and silver were hitting all time highs on consecutive days. And when Mr Bernanke, the man who's driving the economy, was caught saying that this surge in prices was temporary and was not a cause for concern, he got crucified. Investors were selling retailers and industrials left to right thinking, logically, that high pries were going to drive down the stocks.
So what in god's name happened today? Oil finally surrenders that $100 level it had been holding on to for quite a while now, dropping a whopping $10 and settling at around $99. Gold and silver also took a hit falling over $10. And yet -this is the part that I don't get- the sense of panic seems to remain? Let me get this straight. All of our worries over commodities have been lifted of our shoulders and instead of acting relieved we look for reasons to keep feeding this pessimistic mentality. Are we now supposed to panic over the drop in commodities?
No!! Don't panic!! Maybe a week or so ago if you panicked you weren't consider a fool, but you definitely are if you do now. It's time to buy the stocks that were sold because of the high prices in commodities. Think industrial. This earning season the 75% of the companies on the industrial sector that have reported have beaten earnings expectations. This trend will be even stronger now that commodity prices have pulled back.
Trust what makes sense, and in this case what makes sense is that this drop on commodity prices has eased a pressure that has been mounting on the markets for the last couple of months. Lower commodity prices, especially oil, will ultimately be good for the markets and the economy.
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