This week should be relatively quiet for the markets as we wind down a dismal year. The new Israeli conflict leaves us somewhat concerned as one of the unexpected risks for 2009 is growing political instability which could lead to unforeseen wars. High oil prices gave Russia, Iran, Venezuela, and most of the Middle East new found economic power. The reversal of oil's price is starting to create new turmoil and financial stress amongst these countries. Civil wars could break out and greater global tension could be a negative theme for awhile. We hope to be wrong about this possibility but it could result in supply cuts for oil, higher oil prices, increased inflation expectations, and soaring gold prices. Stocks overall probably won't benefit and consumer confidence may remain depressed.
We would like to see a quick resolution to the Israeli fighting before other countries become involved. At this point the fighting is limited in scope and the markets should still be focused on the depth and length of the economic decline.
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