The price of crude oil has plummeted 38% since the summer. Although some view lower prices as deflationary and a negative for the global economy, I think the reduction in energy costs is hugely bullish for domestic-centric equity investors. Here are three reasons why.
1: Crude Down, Earnings Up
Companies benefit either directly from lower crude prices (via cost reduction), or by the extra change jingling in consumer’s pockets. According to Goldman Sachs, each $10/barrel move in crude oil increases 2015 earnings by about $2 per share. This comes on the heels of third quarter results, which saw S&P 500 earnings increase 7.7%, according to FactSet.
2. Crude Is Going Even Lower