Oil, (Tech) Stocks!
Dear Reader,
The Federal Reserve helped markets recover last week. The shale oil and gas companies recovered clocking in 20% gains or more in some cases. Oil also bounced back. The stocks of some of the smallest shale and gas companies have recorded huge losses in excess of 70% from their June 2014 values. If the oil price recovers, they will make hundreds of percents gains from the current level.
Personally, I believe the price of WTI oil will recover to 90 USD in 3-4 years. The latest decline is just too steep. The US and global economy is slowly, but confidently recovering. The production has not increased by so much, as to explain the recent price oil price drop of nearly 50%.
As regards to the stock market, the Federal Reserve will soon raise rates, which should act as a catalyst for a bear market(>20% price drop). However, the stock market will recover relatively quickly from the bear market I foresee. The valuations are just not that stretched, apart from the technology and biotech sector.
In the tech sector, however, there are some secular forces(worldwide internet adoption) that should help prices recover in the midterm after an eventual sharp drop.
Disclaimer: This article is provided solely for informational purposes, and does not constitute an offer or solicitation to buy or sell any securities. The opinions expressed in the blogpost are the author’s and they in no way express the opinion or official position of Bulgarian National Bank!
Conflicts of interest: I may possess some of the securities or currencies mentioned in the blogpost!
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