The latest U.S. winter outlook spells trouble for dry California. There was an ice storm over the weekend, which caused more damage than the historic drought conditions on the U.S./Mexico border. The U.S./Mexico border remains dry, a key factor in the U.S. economy, and a recent report from the National Oceanic and Atmospheric Administration (NOAA) shows that California’s snowpack is in the low 50s for May, the lowest it has been in two decades.
This may turn some buyers off the market as well, despite the fact that the U.S. dollar is up versus both the Brazilian real and the Mexican peso, a sign that the recent oil spill is not hurting consumers enough to stop the recent rally.
U.S. stocks have made big gains despite the lingering effects of the oil spill, but have lost about 20% of their value from the October rally, and have been the worst performer in the S&P 500 since the October crash. This is a huge development and one that many market watchers are waiting to see.
A recent WSJ article called “The Market is Losing Its Mind” is a good way to summarize the situation and the key points that are most compelling to U.S. investors. The story by Paul Zalben, which was published on Wednesday, is one of the few to correctly and directly address the ongoing risk to the U.S. economy due to the oil spill:
“The most immediate consequence of an oil spill is probably to cause a slowdown in global economic activity, which could mean a recession in the U.S. But the spill’s ongoing impact on the U.S. economy is unlikely to be limited to a recession – it could actually push economic activity to a 5-year low.
“The oil spill is not threatening the economic health of the U.S. as a country, but to the economy of the Bay Area, which directly depends on the San Francisco Bay Area’s economy for 60% of its jobs and 30% of its economic output.
“The oil spill is a threat to the broader U.S. economy, because of its impact on the U.S. economy in the Bay Area. Bay-area jobs and the state of California’s economy are already being eroded by the economy