By Global Macro Monitor
The Dow Transportation Index was down almost 4 percent today and if there is any silver lining in the current market turmoil is that Trannies usually lead crude down, which will drop gas prices. The chart below shows the 12.2 percent swan dive in the Dow Transports since July 7th with crude oil barely moving. We’re expecting a catch-up trade to the downside for crude oil in the next few days.
If oil falls, the price of gas falls, which acts as a tax cut for the consumer — the good kind of stimulus! See here for our gas price sensitivity matrix on consumer budgets. A person who drives 70 miles per day, for example, saves around $1,500 on an annual basis for every $1.00 decline in the price of gasoline. All bets off if the Fed cranks up QE3.
This post originally appeared yesterday at the Global Macro Monitor website