The latest season of House of Cards got a lot of things right except (small spoiler alert) the price of gas. Francis Underwood, our sociopathic slimeball in chief, is facing an economic crisis thanks to sky-high gas prices. In the real world gas prices haven’t been this low for close to a decade. In January there was a station in
Ohio
pumping gas at
$1.20 a gallon. And yet, just as in Underwood’s world, fear spurred by economic uncertainty roils the land.
Gasoline prices are now more than 20% below where they were a year ago, leaving a lot more cash in the pockets of most Americans. In times gone by, lower gas prices seemed all that was required for a mini-flurry of optimism to take hold, in both the economy and the stock market. But not this year – not by a long shot.
Related: Fuel prices around the world - in pictures
So why aren’t we any happier? Wow, where to start?
First of all, some consumers are starting to worry that those gas price declines might prove ephemeral. Indeed, after gasoline hit seven-year lows of less than $2 a gallon nationwide over the winter, prices are already creeping higher. But if drivers are paying more to fill up their tanks, it isn’t because the muted rally in crude oil prices is propelling gasoline prices dramatically higher. Instead, the culprit is more mundane: a normal seasonal imbalance between supply and demand. When spring arrives, people tend to begin driving more, while refineries begin maintenance on their facilities ahead of the “summer driving season” – voilà, a recipe for higher prices, and anxiety on the part of drivers.
Not that we were all that confident about the ability of lower gasoline to make a real difference to our household budgets anyway, it seems. The Commerce Department reported that retail sales fell 0.1% in February, and revised a previously reported gain of 0.2% in January into a 0.4% decline, just as gasoline prices were hitting their seven-year lows. Defying all historical trends and economists’ most confident predictions, consumers stubbornly refused to remove their cash and credit cards from their wallets; apparently those remarkable savings on gasoline weren’t enough to make them want to go on a spree at the mall and buoy the economy.
In fact, Americans seem to be downright grumpy these days, cheap gasoline notwithstanding. We seem to have opted for a new mantra: don’t be happy; worry.
Perhaps it’s because much of the time, it feels as if the only good news out there is the price they see when they pull up at a gas station to refill their car’s gas tank.
Sure, the stock market is doing better right now. But how long will that last? Morgan Stanley’s strategists have just published a report arguing that there is nothing to suggest that it will, and arguing that the risk of a global recession is rising.
Then there’s the job market. Yes, of course, the headline numbers look good, with the unemployment rate holding at 4.9%, its lowest level since the financial crisis and the Great Recession that followed. But those figures obscure the real problem: that millions of Americans will probably never recover from those years, and the trends in wages that already had begun to manifest themselves even before that point. Since the recession, the percentage of the long-term unemployed has remained significant, and wages remain stagnant.
Exacerbating it all is the fact that many Americans have less time to turn their financial situation around. The storm struck when we were in our 40s, 50s or 60s, and wreaked havoc on the value of our homes, our retirement portfolios and, in some cases, cost us our jobs. Millennials, meanwhile, are still struggling to find jobs and pay down astronomically high college loans. Saving a few bucks on gasoline bills just isn’t enough.
All that anger has fuelled – pun intended – the most heated election any of us has ever seen. And sadly the truth is most Americans are likely to find that their finances remain difficult, regardless of who moves into the White House in November. There will be no quick fix to the country’s economic problems, and the economy and financial markets conceivably could face a lot of hurdles down the road, depending on what policies are implemented and how. Walking away from trade deals and shutting down immigration sounds great to many, until you realize that legal immigrants help keep many Silicon Valley companies moving and growing and creating US jobs, and that without trade deals, we’d end up paying much higher prices for everything from cotton T-shirts to flat-screen TVs. Ditching Obamacare would have dramatic consequences, as would breaking up big banks.
But there’s actually some good news buried among all this doom and gloom, believe it or not.
There’s a saying on Wall Street that markets tend to climb a “wall of worry”. In other words, financial markets tend to stage stealthy rallies precisely when everyone is caught up in large-scale anxiety attacks of precisely this kind, unable to see any glimpse of sunlight at the end of the tunnel at all. They start looking at big-picture data, like that suggesting that the companies in the Standard & Poor’s 500-stock index will see a dip in profitability for the fourth quarter of last year by the time they finish reporting their earnings, and that this is a sign of – gasp – a looming recession. Well, yes, it might be – if it weren’t for the fact that the profits problem is solely due to the companies in the oil and gas industry, and that if you count out those businesses (which are only 6% of the companies in the S&P 500 anyway!) then profits actually jumped during the quarter.
In other words, there are a lot of people out there wearing grey-tinted glasses right now. Which, if you haven’t put any money into your 401(k) plan or your IRA yet for the year, makes me wonder whether this might not be a time to go ahead and do just that, especially if you’re investing for the long haul and won’t need those funds for years to come. It’s when everything is priced for perfection that you need to start wondering what unexploded mine you’re about to step on and detonate. In times like this, on the other hand, when everyone is grumpy and not even a seven-year low in the price of gasoline can bring a smile to their lips, the buying opportunities tend to be richer. The biggest example of all, of course, dates back exactly seven years, to the date that the selloff following the financial crisis ended, and ignited the biggest 12-month rally seen in decades, a period in which the S&P 500 soared 90%.
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