Border Tax:  Should We Anticipate a Backdoor Gasoline Tax?

Posted by Ryan McGrail, Senior Credit Research Analyst on Mar 16, 2017 10:15:00 AM

How might the new administration make good on its promise of a lower corporate tax rate? The House has proposed funding the cut with a new border tax on imports (BAT). While taxing imports may sound straight forward, there are many less obvious details that need to be hashed out including, specifically, whether or not imported crude oil would be exempt from this BAT.

Crude oil imports

Growing US oil production from the booming shale industry over the past few years has allowed the US to reduce its reliance on imported crude oil from the Middle East, Canada and Mexico. However, the US still imports over 7 million barrels per day. While OPEC accounts for a significant amount of the imports (34%), Canada and Mexico combine to account for a larger share at 44% of imports.

While things between the US and Mexico have appeared frosty since President Trump assumed office, relations with Canada have been more favorable with Trump signing an executive order to advance the Keystone pipeline. Additionally, White House press secretary Sean Spicer has indicated that the administration would favor a border tax that would likely apply only to countries where the US has a trade deficit, which would include Mexico, but not Canada.

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Topics: Commodities

A Trump White House: Potential Impact on Commodities

Posted by Saurabh Lele, Senior Commodities Analyst on Nov 18, 2016 5:00:00 PM

Many of the policies President-elect Trump discussed on the campaign trail align with current and past GOP tendencies but others seem diametrically opposed to GOP DNA.  

How President-elect Trump interacts with the GOP will give us clues as to how policy positions could ultimately impact global commodity prices.

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Topics: Commodities

Oil Outlook for the Remainder of 2016

Posted by Saurabh Lele, Senior Commodities Analyst on Sep 14, 2016 10:00:00 AM

I believe oil prices will likely remain under pressure through the end of the year. There has been exceptional growth in demand for oil over the last 12 months, but inventories have refused to budge as supply remained elevated. US supply has been falling but until recently has been largely offset by higher OPEC production (i.e. Saudi Arabia, Iraq and Iran).

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Topics: Commodities

Relationships Are Complicated: Crude Oil and US Equities

Posted by Craig Burelle, Macro Strategies Research Analyst on Apr 28, 2016 3:30:00 PM

Over the last 30 years, the correlation between crude oil prices and the US equity market has been essentially zero. In the first quarter of this year, the correlation rose to 0.58.

Oil prices became an important barometer for risk-taking at the start of 2016. But, as is often the case, the relationship between the two is complicated. The S&P 500 energy sector is only 7% of the entire index -- so it is not driving index performance. The S&P 500 materials sector has obvious ties to energy and commodities, but only represents 3% of the index. So if the S&P 500 has only a modest commodity exposure (approximately 10%), why did the entire market collapse (and subsequently rally) along with crude oil?  

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Topics: Macro Strategies, Equity Research, Commodities

Loomis Sayles analysts are career professionals who offer deep knowledge and experience in a diversity of global asset classes and market sectors. These dedicated experts provide the insight essential to supporting our portfolio management teams across a wide range of investment strategies.


 

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