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December 31 2015

It was a short week, but it wasn’t quiet.

Oil prices moved higher, according to The Wall Street Journal, after the U.S. Energy Information Administration reported crude-oil inventories fell unexpectedly last year. Analysts had predicted oil supplies would rise.

One expert cited by The Wall Street Journal suggested the stockpile decline and subsequent oil price rally owed much to Gulf Coast refiners reducing inventories “to mitigate state ad valorem taxes on year-end crude stocks.” If that’s the case, the oil price increase may not be sustained.

Regardless, improving oil prices gave U.S. stock markets a boost. In particular, the Standard & Poor’s 500 Index (S&P 500) benefitted from improving performance in the energy sector:

“Of 80 U.S. listed oil and gas producers, all but one – a bankrupt company – rose on the day, with nearly half of the companies up more than 10 percent. Energy shares were the biggest gainers Wednesday in the S&P 500, up 3.8 percent and helped the S&P 500 on the whole gain 1.2 percent in late-afternoon trading.”

Barron’s reported energy stocks had gained 5 percent for the week, but were still off by about 22 percent for the year.

The Organization of the Petroleum Exporting Countries (OPEC) released its World Oil Outlook last week. BBC reported OPEC anticipates oil prices will begin to rise in 2016, although its producers’ share of the market is expected to shrink by 2020 as rival oil-producers proved to be more resilient in the face of low oil prices than had been expected.

  • Data as of 12/24/151-WeekY-T-D1-Year3-Year5-Year10-Year
  • Standard & Poor’s 500 (Domestic Stocks)0.0280.001-0.010.1310.1040.051
  • Dow Jones Global ex-U.S.1.9-6.2-6.60.3-0.70.7
  • 10-year Treasury Note (Yield Only)2.2NA2.21.83.44.3
  • Gold (per ounce)0.9-10.6-8.9-13.6-4.97.5
  • Bloomberg Commodity Index1.3-24.8-26.1-17.3-13.2-7.4
  • DJ Equity All REIT Total Return Index22.61.710.611.87.2

*Indices are unmanaged and investors cannot invest directly in an index.
*Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association
*S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

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Bart A Zandbergen, CFP® is a Registered Investment Advisor with Optivest, Inc and a Registered Representative with Gramercy Securities, Inc. Investment advisory services are offered by Optivest, Inc. under SEC Registration and securities are offered through Gramercy Securities, Inc., member FINRA & SIPC, 3949 Old Post Road, Charlestown, RI, 02813, 800-333-7450.

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