If you might be concern about the current financial turmoil, there are many questions for the reason for the recent uncertainty.
I believe that one reason in the price corrections is the slowing growth which triggered also the oil price into new lows.
Saudi Arabia and other oil producing countries are pumping oil at record levels. Now at 28 USD per Barrel all market members make losses. That's a fact; just take a look at this chart:
|Source: Zerohedge 1/2015 and Aliance Bernstein, 10/2014|
No one can sell under production cost at a long time. This will cause also mainly pain, especially in the oil and gas sector and emerging markets. A big wave of market consolidation will come in the future if oil stays at these levels or fall. Only the fittest stocks with the highest financial reserves will survive.
The good thing is that the American economy is doing well. They have no expose to the energy market. Refiners could also benefit a little from the decreasing oil prices.
The biggest risk is the loan portfolio of major banks. According to Bloomberg, JPM has the highest exposure to the energy sector with a 5% Portfolio share. That's a high value compared to the equity.
The final question is in my view how many of them will be writing down and could they cause a financial crises?
I hope the leaders will have learned from the financial crisis in 2008 and not let one bank go bankruptcy. How do you evaluate the market? Do we see an end of the dark tunnel?