Oil prices 'plunge' to $92...Wall Street "Could lead to a 10% rally in US stock market"

▲ US stock market, international oil prices/AI generated image

A Wall Street strategist's analysis suggests that falling oil prices could trigger a 10% rally in the New York stock market.

According to crypto media outlet BeInCrypto on September 28 (local time), David Spika, Chief Investment Officer (CIO) of Turtle Creek Wealth Advisors, analyzed that inflationary pressures are easing as West Texas Intermediate (WTI) crude oil prices recently dropped from around $100 per barrel to $92. Spika explained that the decline in oil prices could push the yield on US 10-year Treasury bonds from the current 5.17% down to around 4.75% to 4.78%.

If Treasury yields stabilize, the S&P 500 index could see an additional 5% to 10% increase by the end of the year. The restart of Saudi Arabia's pipeline and the easing of diplomatic tensions with Iran have contributed to the downward pressure on oil prices, which is seen as a welcome relief to market sentiment that had been subdued since the Federal Reserve (Fed) raised its benchmark interest rate from 3.75% to 4% on September 16.

Spika named Microsoft Corp. (MSFT) and Berkshire Hathaway Inc. (BRK.A) as top picks for robust performance even in a high-interest rate environment. Microsoft demonstrated AI growth with a 43% surge in Azure cloud revenue, while Berkshire Hathaway is analyzed to have strong defensive capabilities with approximately $365.5 billion in cash and short-term Treasury bills.

However, a warning was also added that this stock market rebound logic is vulnerable to geopolitical variables. If instability in the Middle East leads to a surge in oil prices again, or if the possibility of additional interest rate hikes by the Fed increases, downward pressure could be exerted not only on the stock market but also on overall virtual asset adoption, including decentralized finance (DeFi) and centralized exchange (CEX) activities.

[Key Summary of the Article]

-David Spika of Turtle Creek predicts that the S&P 500 could rise by up to 10% due to falling oil prices and subsequent lower Treasury yields.

-Easing Middle East tensions and pipeline restarts are bringing oil prices down to $92, absorbing the shock of the Fed's interest rate hikes.

-Microsoft and Berkshire Hathaway were named as top picks, but a rebound in oil prices would inevitably put pressure on virtual assets and the stock market.

*Disclaimer: This article is for investment reference only and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*