The Vanishing Fear Factor: Oil Prices Hit 3-Month Low Amid Record U.S. Production

The recent decline in oil prices suggests that the Federal Reserve may have overtightened and that the financial system is at risk. Lower oil prices indicate a decrease in demand-pull inflation and break the commodity cost-push inflation. This, combined with a tapped-out consumer and falling oil prices, could lead to disinflation and hurt small-cap stocks. The behavior of long-duration Treasurys and small-cap stocks supports this narrative. If this trend continues, it could signify a significant shift in the economy.