Agenda

Presented by Northfield President Dan diBartolomeo. 

The current war conditions among the US, Israel, and Iran have elevated crude oil prices roughly 50% in less than three weeks.

In this presentation, we provide analytical output describing the likely performance of equity sectors, both US and globally under an oil shock driven by geopolitical conflict. We will illustrate that price changes associated with supply shocks behave differently from price changes driven by changes in demand.

While some industries are easily understood as either producers or consumers of oil (airlines, chemicals) the analysis will focus on more nuanced and less intuitive relationships. For example, long term analysis of equity markets suggests that the industry where earnings are most closely tied to oil prices are “big box” stores such as Walmart and Home Depot. Such firms operate on thin margins for often bulky or heavy goods, so shipping costs are a material part of expenses. These stores are physically large, implying high energy costs for lighting, heating, and air conditioning. Such stores are generally located in suburban or rural areas requiring a longer and costlier drive for shoppers Finally, their core clientele is lower-and-middle income consumers who have less disposable income during periods of high costs for energy (e.g. gasoline). 

About Dan diBartolomeo

Dan diBartolomeo is President and founder of Northfield Information Services, Inc. He is also a former Visiting Professor at the CARISMA Research Center of Brunel University in London and serves on the Board of Directors of the Chicago Quantitative Alliance and the advisory board of the International Association for Quantitative Finance. He is a regional director of the Professional Risk Managers International Association, (PRMIA), and the Quantitative Work Alliance for Applied Finance, Education and Wisdom (QWAFAFEW). He is past president and director of the Boston Economic Club.

Dan has been admitted as an expert witness in US federal courtsand state courts for litigation matters regarding investment managementpractices and derivatives.

In 2010, Dan received an award from Institutional Investor magazine as one of the forty most influential executives in financial technology in connection with his analytical work that helped uncover the Madoff investment fraud.

Dan is a director of the American Computer Foundation, and formerly served on the industry liaison committee of the Department of Statistics and Actuarial Sciences at New Jersey Institute of Technology. He continues his more than twenty years of service as a judge in the Moskowitz Prize competition, given by the University of California at Berkeley for excellence in academic research on socially responsible investing.

Dan has a long list of publications including books, book chapters and research papers in professional journals such as Financial Analyst Journal, Quantitative Finance and Journal of Investing. In 2017, he was named co-editor of the Journal of Asset Management.