The financial markets are complex systems. They can move from one event to the next so quickly that it's hard to know what’s driving prices.
For example, look at the roundtrip oil prices in the chart below.
Oil prices surged to over $120 a barrel in the first half of 2022 on concerns over how Russia’s invasion of Ukraine would influence crude supply. But in the second half, oil prices have trended lower as traders feared a global recession might reduce oil demand.
So which one is it? Or is it both? Regardless of what you believe, oil prices have made a round trip in roughly 12 months.
The critical takeaway is that markets can be turbulent. One can quickly replace the factors that push prices higher with a new set of characteristics that drive prices lower.
So ask yourself, “Will the talk about a recession be the theme for all of 2023, or will a new storyline replace it at some point?”