A Market Correction Is Long Overdue And The Current Spike In Oil Prices Is Insignificant

The markets have had few news to react to and has been trending higher for a long period. Is a pullback or a correction overdue? Hank Smith, Chief Investment Office at Haverford Investments, believes this is an understatement. In an interview for CNBC, he argues it has been almost three years since the market has registered a significant correction (between 10% and 19%), but is not sure what to make of the 200 point drop in the Dow Jones Industrial Average in the last couple of days.

“Whether it’s going to be a pullback [...] or a full-fledged correction, I’m not sure. I’m more certain that whatever it is, it’s going to be relatively short-lived”, said Smith.

According to him, there are a large number of investors who are currently on the sidelines, but will be looking for opportunities to enter the market.

Another interview participant, Maury Harris, UBS chief U.S. economist, argues the current spike in oil prices is not a source of concern and that it will not have a meaningful impact on the consumers.

“We’ve seen gasoline prices go up before and the American consumer knows they go up, they go down; they’re a yo-yo”, he said.

Harris claims the consumers will not change their behavior as the current developments are temporary. Therefore, he concludes that the economic consequences will not be substantial. Harris argues that the developments in the labor markets are of a greater importance. He believes the economy still has room for growth before inflation becomes a problem and is of the opinion that “more money in the hands of workers” thorough higher wages and more jobs will lead to more spending over the summer. Harris argues that this is far more important than a temporary rise in oil prices.

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