Consider an industry that isn’t a heavy consumer of commodities, such as financial services. Why should it care? Granted, these firms have to power up their buildings and branches, but overall, their energy expenses are small relative to those of human and technology resources. Nevertheless, they do care and should, because they most likely have a solid client base that is negatively affected by lower commodity prices, such as miners, energy producers and farmers. And their clients suffer as their credit ratings are downgraded and they cut back on financial services.
Lower commodity prices are indicative of an economy that is slowing, and portend a domino effect that negatively impacts the broader capital markets. Now is the time to question the assumptions behind the rosier economic forecasts -- are they real and where are they coming from and can they be sustained under the current landscape of too much supply and insufficient demand?
This Bloomberg Prophets column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.