Tags: Kelly | oil | economy | earnings

JPMorgan's Kelly: 'Falling Oil Prices Positive for US Economy'

By    |   Thursday, 23 October 2014 09:32 AM

U.S. crude oil prices hit a two-year low last week, leaving some financial experts worried, given that the decline stemmed partly from sluggish global economic growth.

But David Kelly, chief global strategist for J.P. Morgan Funds, isn't concerned about the impact on the U.S. economy. "Falling oil prices are positive for the U.S. economy," he tells CNBC. "So it is not a reason for the stock market to go down. Ultimately that's a reason for stocks to go up."

December WTI crude futures were at $80.47 a barrel near midday Friday, down $1.62, or 2 percent, from Thursday.

Another factor pushing prices down is bulging supply. U.S. oil production has soared to its highest level since 1985. "The United States is swamping the oil market with supply," Kelly argues.

That has obviously represented a bounty for oil producers.

As a result, oil is no longer the indicator for the global economy that it used to be, he maintains.

"Oil has become an untrustworthy barometer."

Kelly recommends investors focus on fundamentals. "We are having a good earnings season. One of the strongest earnings reports we'll ever see for a quarter is what we're in the middle of right now. And we've got low interest rates. Lower oil prices are anchoring down interest rates. Strong economic growth is pushing up profits. These are very good fundamentals," he explains.

"I think long-term investors should just try to look past the noise and take advantage of opportunities here."

But Ed Yardeni, president of Yardeni Research, sees things a little differently. He says the 2001-08 supercycle of rising commodity prices is over and the economic implications are dire.

"The bubble that's bursting now is the commodity supercycle," he writes in a commentary provided to Moneynews.

"The problem is that the global economy stopped booming around 2011, when the eurozone started falling into a recession and China began to slow," Yardeni says. "Too much capacity was expanded to meet the demands of a booming global economy led by China."

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U.S. crude oil prices hit a two-year low last week, leaving some financial experts worried, given that the decline stemmed partly from sluggish global economic growth.
Kelly, oil, economy, earnings
335
2014-32-23
Thursday, 23 October 2014 09:32 AM
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