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LPL Financial chief market strategist Jeffrey Kleintop explains how rising gas prices weaken the economic backdrop.
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-- -- All right so gas prices continue to rise but could that mean more than just a drain on your -- my next guest says that if they continue to climb they could speak the market get it.
Jeff mine bump up infants you are mixed additive.
LPL financial.
I really interesting -- you put together -- -- -- ten factors that contribute to springs slighted stock.
One -- that was gas prices of course let's talk about that first what is the range that you think becomes the danger and how com.
We're looking back over the last several years it was between 380.
And 410 that when prices got end of that range it fueled.
I'll pull back in the stock market panic that if we got -- put a moratorium on the contrary I thought I get through that segment affect the guy had but you're right.
That's the danger zone and it's not so much that the gasoline prices alone that contribute to the market pullback.
It's that it weakens the economic backdrop I'd I'd point out that every ten cents.
That gasoline prices rise she more than ten billion off consumers after tax incomes so -- their spending power so it's important it weakens the backdrop.
Makes us more vulnerable to a shock such as something that might come out of Europe or something that come out of Washington DC that have been really -- as a -- react.
It's like the money disappearance I mean you're paying its oil companies who in theory I don't know -- -- like it's going away wise it's such a bad thing.
It doesn't -- but listen there's a you -- 70% of the economy is consumer spending and already feeling that hit from the payroll tax increase.
-- pulling back on their available spending this is another drag on top of that.
The the month of march most often in the market is led by the retailer Citi.
Nineteen of the last twenty years the retailers and outperform the overall market.
And that's in part.
Because this is that you do get tax refunds -- numbered for reasons but with higher gasoline prices this time that puts that at risk so when the leadership -- of the market.
May not be there this time around contributing to overall weakness how.
Come up with creating private sectors regression analysis or is that like a commonly accepted thing to other people think -- -- what makes you think 380 -- that the magic number.
Well just looking back if you look back particularly over the last two years a -- go back further than that.
That's the threshold at which we kind of crossed into an area where it just preceded these big market.
Pull -- again not that it's self drove them but it got into an area where we can -- economic backdrop enough that we were vulnerable to a shock from Europe or from Washington.
See you had ten factors that you highlighted this is one of them there -- -- Citigroup economic surprise index consumer confidence that's a clear one.
Lots of revisions to Wall Street analysts' earnings estimates the yield curve.
Yelp -- financial current condition index a big less how -- on that list have to come together and ordered detained and market your opinion.
You'll last year it was only six of the ten in the prior two years it was in the jar it was a vast majority of the nine or ten of them but last year we get the same springs slide only with six of those indicators -- they're usually maybe two months before got the slide.
Indicating that it was to -- so -- watching closely this year.
-- Italy or otherwise are entering -- normal standard time so how are we doing a good indicators because on the gas -- obviously.
We're really close we were just looking at 379 at 385 -- is the bad spot so that's that's scary -- things turn around the -- and in fact.
We're seeing futures slide a little -- so needy needy we'll get some relief there well what about the other -- how close are -- to the dangers around.
-- all cross our fingers on gasoline the other still leads Citigroup economic surprise index is beginning to roll over.
Analyst Wall Street you know -- the revisions for earnings expectations are coming down so a number these are starting to turn negative print 1000000000000 march and April or wanna watch them most closely that's where they really -- -- signal.
In the last couple of years.
Check I don't know come -- and give us an update on these factors the second this is really interesting research thanks for coming not.
-- -- to Melissa thanks.
And we --
