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November 2015 Economic Dashboard

The terror attacks in Paris and San Bernardino are stark reminders the global war on terror is not receding and will remain with us indefinitely.  Stock markets around the world rallied after Paris in a show of resilience that commerce will not be knocked off balance by the terror risk.
Readers will note the monthly oil price chart shows the price of one barrel of crude is plumbing new multi-year lows.  Global supplies have not been reduced to meet sluggish demand.  US production remains at generationally high levels, despite the reduction in the number of rigs over the past year.  The wells that remain in production have more oil than first anticipated.  Saudi Arabia has continued to flood markets to protect market share; the just ended OPEC meeting in Vienna confirmed OPEC production will remain at elevated levels until US production backs down.  We’ll see how long the over-supply of oil keeps up and prices remain at $40 per barrel or lower.
US consumers have been the biggest beneficiaries of cheap oil.  41 states recently had prices for regular gas below $2 per gallon.  This month’s featured chart shows the annualized pace of new light vehicle sales (cars, trucks and SUVs).  The pace of sales in 2015 will likely match the all-time high seen in 2000.  Trucks and SUVs are setting new records due to low gas prices; consumers have focused their spending since the recovery began in 2009 on vehicles, dining and vacations.  And, trips to traditional brick-and-mortar retailers have dropped (despite cheap gas!) as online purchases continue to take a greater share of consumer wallets.
We fully anticipate the Fed will finally begin to normalize short-term interest rates at their next meeting on December 15 and 16.  The first rate hike since 2007 was expected to be in September but market volatility at the end of the summer delayed the hike until this month.  Central banks around the world remain in full-easing mode, giving the Fed some cover to move forward.
We wish all clients and friends a wonderful holiday season and a very Happy New Year!

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