Money Advice

Oil prices rising, but U.S. economy still healthy

Posted by The Simply Money Advisors Team on May 14, 2018 11:11:00 AM

U.S. relations with the rest of the world dominated headlines last week and will likely take center stage again this week.

The U.S. decided to pull out of the Iran nuclear deal because the Trump administration doesn’t believe it properly reined in Iran’s nuclear ambitions, addressed Iran’s long-term missile program, or reduced violence in the region.

The administration left the door open for a new deal, but if there isn’t one, severe economic sanctions will be reinstated.

While this has little direct economic impact on the U.S., this could significantly reduce Iran's oil output, and that’s one reason oil prices have been moving higher lately.

However, rising U.S. oil production could fill that void, which might keep prices somewhat in check. Currently, the average cost of regular gas in the U.S. is about $2.86/gallon, which is up 52 cents from a year ago.

Additionally, Wall Street will be looking for notification of a NAFTA (North American Free Trade Agreement) deal by the May 17th deadline that House Speaker Paul Ryan said is necessary in order for Congress to pass it in 2018 before a new Congress takes over next year. 

Also, this week, the economic calendar highlights report on retail sales, manufacturing, and housing.

While corporate earnings season is 90% complete, there are a few key retailers reporting this week, such as Macy’s, Home Depot, and Walmart. The results for the first quarter of the year have been strong, as 81% of large companies reported better-than-expected earnings and earnings are 24% higher compared to the first three months of 2017.

The Simply Money Point

Even though stock market turbulence may pick up in the short term until there is more clarity on trade with other nations, the U.S. economy is in a healthy position.

Recession risk is very low for the next six to nine months and the economy should see solid growth in the second quarter as well as the remainder of the year.

Topics: Economics

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