How to Play the Oil Market Like a Professional Investor
Stocks have been on a roller coaster ride already in 2018, and we’re not even through the first quarter.
The roaring start we enjoyed in January changed to a whimper in February, as the Dow Jones Industrial Average suffered a 9% pullback before rebounding. The blue-chip barometer is now sitting on a small gain for the year at the moment.
The S&P 500 dropped nearly 9% to bounce back to a gain of roughly 3% since the start of 2018.
The endless twists and turns in Washington — with new tax codes, tariffs and the potential for rising inflation — are keeping stocks lurching higher and lower. We’re not making the same progress that we have enjoyed in past years despite the strong economy, and investors are looking for signs of the next bear market.
But there is one asset that is not drawing too much notice on Wall Street. That’s creating a great opportunity for investors.
The Mover You’re Missing
Investors recently have been reacquainted with the concept of volatility. Stock haven risen and fallen like a seesaw.
But oil has escaped the notice of too many traders.
Since tagging a low in February 2016 of $26.05 a barrel, “black gold” has rallied more than 137% in the past two years.
What’s more, its technical trend is reassuring. While past performance is not a guarantee of future results, oil is sitting in a nice uptrend with higher lows and higher highs.
The next key area for the commodity from a technical perspective sits in that $110 to $115 region, which stopped crude from April 2011 through July 2014. That means crude oil has room to gain approximately 85% from its current level before it reaches $115.
Right now, crude oil is enjoying a short-term boost from a mix of dollar weakness, a decline in output from OPEC members and increased demand thanks to cold weather across the East Coast.
From a longer-term perspective, oil could see more gains as major oil producers are slow to spend money on exploration. Consultant group Wood Mackenzie reported that oil producers slashed their projected spending for oil and gas exploration for a fifth straight year in 2018.
The lack of new reserves could work to squeeze supply in the future, potentially driving oil’s price higher.
A Safer Way to Play Oil
Investing in oil typically requires a strong stomach. The commodity is no stranger to volatility.
But there is a way to indirectly play oil without the risk!
EverBank, a division of TIAA, FSB, Member FDIC, has recently issued the Petrol Currencies MarketSafe® CD.
This indexed, U.S. dollar-denominated certificate of deposit features a potential Market Upside Payment based on the equally weighted performance of the following four currencies from petrol-rich countries, versus the U.S. dollar. The CD’s performance is not linked to the price of oil, but to the average performance of these underlying currencies. These countries have significant exposure the petroleum market.
The CD offers access to:
- The Brazilian real.
- The Canadian dollar.
- The Mexican peso.
- The Russian ruble.
The measurement of the currencies is point to point — from start of the CD’s term to maturity. What’s more, the three-year CD offers the potential for enhanced earnings via a 2.0 leverage factor. That’s double the return.
For example, if the currencies within the CD return a combined gain of 9.52%, you would actually see a gain of 19.04% at the end of the three-year period. (There is no periodic interest or annual percentage yield. Payment is only at maturity at the end of the three years.)
And what happens if the overall return at the end of the three-year period is a loss?
You get 100% of your deposited principal if the CD performance is less than or equal to 0%. There’s no risk to your original investment.
For full details, important disclosures and potential payout examples, click here to read the term sheet for the Petrol Currencies MarketSafe® CD. The deadline to fund the Petrol Currencies MarketSafe® CD is April 19.
For the sake of full disclosure, we receive a marketing fee based on our relationship with EverBank. But, honestly, we’d work with them regardless.
Don’t miss out on this unique opportunity!
Sr. Managing Editor, Banyan Hill Publishing