A stock has the potential to go down as a currency goes up. An example of this is oil equities and the U.S. dollar. As oil prices have been increasing, the U.S. dollar has been losing value, but some recent events have suggested to financial advisors that this trend is about to reverse.
Definitions of the Terms Bearish and Bullish
The sellers have taken control of a stock when it is bearish. This means that they are selling the stock and the price is falling. Those who are looking for stocks to buy will, of course, want to stay away from these stocks. When stocks are bullish, people are buying them again and the prices are rising.
Gasoline prices have been so high recently that some people believe the price of oil will continue to rise into the future. On the other hand, others believe that now is not the time to buy oil stocks. These same people also believe that those who had oil stocks should now be purchasing the dollar even though it had been declining.
Be Bearish on Oil, Bullish on the U.S. Dollar
The dollar has been falling recently as oil prices have been rising, but it appears that several factors are going on at the moment that tell advisors it is time to switch gears completely:
The Previous Growth In the Global Economy Is Decreasing
China, India and Brazil are examples of economies that were experiencing tremendous growth recently, but are slowing down. The economic troubles facing the European Union are adding to the global slowdown of things that need oil for their production. Because there is less money to purchase products, there is less of a need to manufacture the things that require oil. Therefore, the demand for oil all over the world is expected to go down.
The U.S. Dollar Is about to Begin a Correction
There is an inverse relationship between oil equity stocks and the U.S. dollar. As oil stocks go down, the U.S. dollar strengthens. Experts believe this is about to happen, because the U.S. dollar is very close to beginning its correction which means it will begin to rise again.
Investors Appear to Agree That Oil Prices Are about to Fall
Oil prices have fallen below $100 per barrel, and they are expected to continue their downhill climb. Some people even are predicting that prices will reach as low as $88 per barrel. At the moment, the price has taken an 11 percent drop down to $92.91.
Oil Supply and Demand Is Not What Had Been Expected In the United States
During the summer months, the demand for oil is always expected to rise due to increased driving to vacation destinations. This has not been the case lately, and the increased demand for oil consumption over the Memorial Day holiday did not materialize. The supply continues to outweigh the demand which is another reason to be bearish on oil stocks.
Experts predict that oil will continue its downhill climb, and the dollar will begin a correction taking it in the opposite direction. Investors are advised to sell their oil equities if they have them, and purchase the U.S. dollar.