Oil prices stay elevated as Iran supply fears overshadow Russia measures
The stock market is in the midst of an impressive year-end rally where quality stocks with positive analyst revisions are under persistent institutional accumulation. This is setting the stage for an impressive start to the New Year will bring another round of record earnings as well as 5% annual GDP growth.
This explosive GDP growth is not expected to be inflationary due to the fact that (1) crude oil prices remain near a five-year low, (2) we are importing deflation from China (that is why a 98-inch TCL TV is only $1,600), and (3) weak economies worldwide from a demographic decline (shrinking households) are naturally deflationary. All economists are trained to fight deflation, so at least 1% in further key interest rate cuts are anticipated, as influential Fed Governor Christopher Waller is now calling for.
This combination of explosive GDP growth from trillions in onshoring, the data center boom, low crude oil prices, a shrinking trade deficit from strong exports, AI productivity gains, and now lower interest rates, we are now in what I like to call “economic nirvana.” Despite my optimism, I do get questions on what can go wrong. The primary disruptions to this economic prosperity will be external events, such as the Ukraine/Russia fighting, the Venezuela naval blockade, and a possible implosion in the European Union (EU).
The latest farm protests in London, Brussels, and Paris are demonstrating how the ruling elites are systematically destroying their economies. In Britain, the farm protests are largely over estate taxes as well as oppressive regulations. In the EU, the Net Zero mandates that caused farmers to cull their herds of animals to reduce methane emissions have caused French farmers to spray manure on government buildings in Brussels and Paris. In the meantime, Germany wants the EU to sign a free trade agreement with Latin America to reduce food prices, but Italy and other EU nations want to defend their struggling farmers from non-Net Zero countries in Latin America that do not have oppressive EU regulations.
The EU was designed to be a monetary and trade union, but Brussels has evolved into an oppressive political machine that meddles in many EU countries that is hindering economic prosperity. An eventual breakup of the EU remains a possibility.
The other possible implosion remains cryptocurrencies that have had a horrible 2025. Even worse, as I exposed in the latest Navellier Market Buzz, major crypto ETFs are having massive pricing problems. With gold now up over 60% in 2025 and most cryptocurrencies negative, the time has come for the crypto crowd to switch to gold.
The Wall Street Journal reported that the U.S. naval blockade on Venezuela is harming Cuba, which has an acute electricity shortage and many hungry people. Cuba is dependent on Venezuela’s crude oil to generate electricity, so blackouts are going to be more common. An acute shortage of goods and food is now increasingly common in Cuba, so it will be interesting to see to whom Cuba will reach out to for help.
The bottom line is the U.S. remains an oasis compared to the rest of the world. Investment capital continues to flow into America. The U.S. dollar is expected to appreciate significantly in 2026, since the alternatives remain poor and currency devaluations are possible, especially in China, due to its hideous deflation that is destroying purchasing power. So, I hope you feel good about America and realize it is an economic oasis compared to the rest of the world.