In 6 years, we have halved energy imports as a percentage of GDP. Domestic fossil fuel imports decreased to $225 billion, or 1.3% of gross GDP in 2013 from $412 billion – or 2.8% – of GDP in 2008. This has really caused big downward pressure on oil prices, and it has rattled the stock market a bit, even though it is a positive development.
Skip: If it were positive, why would the markets react negatively?
Mellody: On the surface, it does seem contradictory. It is actually more like the market is taking a page from Goldilocks, trying to strike a balance between slower growth around the world with the benefits of cheaper oil and more money in the pockets of consumers.
Last week’s jitters has a lot to do with the fact that in the short- to medium-term, the energy sector is going to have a rough go, with huge companies like Exxon, Chevron and others taking a hit. Energy makes up about 10% of the S&P 500, so the negatives for the energy sector certainly show up in the broader market.
Skip: Good to know! One last question, Mellody: what should we expect from the market in 2015?
Mellody: Well, Skip, I have to say I am an optimist. All of the economic indicators are looking solid, and they point to slow but steady growth here in the United States – even in spite of slowing economies in other parts of the world. On top of that, corporate America, and multinationals around the world, are in great shape. I expect 2015 will be like 2013 or 2014.
The past two years have been really outstanding, and it looks like they will both be double-digit growth years for the markets. However, I think 2015 will be solid – again not gangbusters – but solid. Remember, there are always adjustments and bumps, but things are pointing in the right direction.
Skip: Thanks for joining us, Mellody, for this final Money Monday of 2014!
Mellody: You are welcome, Skip! Happy holidays! Have a great year end, everyone!