What does this week's wild oil price swing mean for the markets and economy?
As Hedgeye CEO Keith McCullough explains in the clip above from The Macro Show, any sustained rally in oil prices over the next few months could actually increase the chance of U.S. recession.
Higher oil prices would pull our proprietary 4Q numbers lower into Quad 3 (growth slowing, inflation accelerating) – that in turn would make our longer-term forecasts worse.
“You would be even more deeply into stagflation. If it’s higher oil and lower consumption data, that’s Quad 3. And that would go right at the heart of what most of the bulls on the U.S. stock market have gone to, which is that the U.S. consumer is in ‘great shape.’”
While we’re not ready to make a recession call, McCullough explains that with every new data point, the outlook changes.
“It’s not a high probability, or we would make that call. But after a day like today [Monday], people’s behavior begins to change. Don’t assume what happened on Friday is going to be your market outlook is going to be the same for three to six months. Take every data point and change accordingly.”
Watch the full clip above for more.