Commodities And The Stock Market

1040 Words Mar 14th, 2016 5 Pages
When comes to commodities and the stock market, investors are quick to blame oil prices for causing market volatility. Granted this is case more often than not, other commodities such as corn and gold have a tremendous impact on daily stock prices. Global commodities are typically broken down into 4 basic headers; energy, metals, agriculture, meat & livestock, and consumer. Energy, as we know, watch the most heavily scrutinized assets including oil and natural gases. Metals, on the other hand, track our most precious assets, gold and silver. While agriculture, meat & livestock and consumer observe corn, coffee and live cattle to name a few. Since commodities, and not just oil, are key inputs of many goods, they have a profound impact on …show more content…
Obviously when oil prices are volatile, earnings from company’s like Exxon Mobil will fluctuate. Investors are quick to take notice of this, causing share prices of energy companies to fall. However, what you may not be aware of is that oil is a key input into a variety of goods and products we use daily. Retail manufactures often use oil to make plastics or fertilizers found at your local Walmart. By extension, when the price of oil rises, major retailers pass on rising costs onto consumers in the form of higher prices. If they aren’t able to pass along the cost increase, then retailers face an adverse impact on margins, subsequently hurting stock prices. Moreover, oil prices have a directly effect what you end up paying at theh pump. When oils prices are high, consumer spending typically suffers since consumers must dig deeper to on necessities and fuel. Auto manufactures often feel this effect through falling sales of its higher margin SUVs and trucks.

Gold

Unlike oil, gold prices indirectly follows movements in the market. Throughout history gold has been viewed as a counter cyclical asset, which means the precious metals gains value during market down turns. Since gold is found all over the world and holds high intrinsic value, it is often viewed as a universal currency. When the outlook of the equity markets looks bleak or corporate earnings are destined for doom, investors will flock to the precious

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