Camelot Investment Committee Talking Points

The Political Circus

On Monday night, the highly anticipated debate between Republican candidate Donald Trump and Democratic candidate Hillary Clinton began the homestretch in US politics. The hour and half debate focused on security in the United States, race relations, and economics. Each candidate shared their view point to an audience estimated at 84 million people (Stelter). Both Trump and Clinton expressed their views similar to how they have debated in the past primary debates. Although the moderators tried their best to stick to the questions both candidates tended to meander away from the questions and express another point. This marks the first of four presidential debates. The next debate is between vice-presidential candidates Mike Pence and Tim Kaine on Tuesday, October 3rd. 

Beyond the heated spectacle, the presidential election cycles tend to create elevated volatility in the markets. Over the past elections cycles, the VIX has risen in the 2 month leading up to the elections compared to non-election years (Greiner). Volatility today is between 13 and 15, which is below the historical average of 20. This may be the case because of other factors outside the election, but investors historically tend to create a reaction when the voters have decided on the second Tuesday in November (Greiner).

Mistrust in OPEC

This week, leaders of OPEC met to discuss about cutting production to deal with the slide in oil prices since 2014. The technological innovations in oil drilling have started to put this cartel in a quandary. For decades, OPEC has had a considerable voice on the price of crude, but as other countries discover and drill for oil, OPEC members are in a bind. It seems that the OPEC nations’ main economic driver is still oil, and if they cut oil, they will most likely lower revenues from higher prices. This possibility gives shale producers the opportunity to increase production, which causes a decrease in OPEC share and influence on oil (Kantchev). If they continue to produce oil or increase production, they still stand to lose revenue due to lower prices (Kantchev). This has caused a strain on OPEC members because of this lose-lose situation.

The closed door meeting attempts to create an agreement between Saudi Arabia and Iran about capping Iran’s oil production (Kantchev). The current cap is 3.6 million barrels for Iran, and the proposal is to increase the cap to 4 million barrels a day (Kantchev). Iran is coming off of debilitating restrictions from international pressure, so it is in Iran’s interest to increase beyond this proposal to stimulate economic activity (Kantchev). On the other side, Saudi Arabia and Venezuela are petitioning the cap because of recessionary pressures in their economy. Tensions are starting to rise between the two Middle-Eastern powers, and oil markets will continue to exhibit erratic activity until there is a compromise. 

Compiled by the Camelot Portfolios Investment Committee

Darren Munn, CFA, Chief Investment Officer

Sarah Berndt, Portfolio Manager

Eric Kartman, Research

Drew Steinman, CPA, Trader/Research

Frank Echelmeyer, MBA, CKA®, Advisor Consultant

-for Broker/Dealer and RIA use only-

References

Greiner, Bill. Market Volitility and Presidential Election Years. 16 December 2015. 2016.

Kantchev, Georgi. OPEC Ministers Reach for Compromise on Oil Output. 28 Sept 2016.

Stelter, Brian. Debeate Breaks Record as most-watched in US History. 27 September 2016. 2016.

 

Disclosure

The materials presented is for use by professional advisors only.  It is not intended as informational and educational, and is not intended to be interpreted as investment advice.  The references to specific investment ideas, be they concepts, trends, sectors or even specific securities, are not recommendations for any advisor to adopt for any of their clients.  No investor or client reading these materials should view them as investment advice.  These materials are to be utilized as a catalyst for thought and discussion regarding the economy, investments, and responsible investing in general.  Past performance is not necessarily indicative of future returns, and there is no guarantee that any information presented herein will contribute to a profitable portfolio.  All facts referenced herein are derived from sources believed to be reliable.  A271