The Rule of 10

Have you heard of the Rule of 10? It’s especially relevant now with both interest rates and energy prices sky high.

Created by Don Rissmiller, an economist, it states that the economy will struggle when interest rates and the cost of energy (e.g. gasoline) added together reach double digits (i.e. “10”). The average rate of a 30-year fixed mortgage crossed over 5% (“5”) in the second week of June 2022, while the average price of gasoline at the pump is nearing $5 (“5”) nationwide. For further context, as gasoline moves past $5 and comes closer to $6, that would equate to a $150 price on a barrel of oil. The time to buy good oil stocks (e.g. XOM, CVX) was 18+ months ago, which is why it is always important to pay attention to the markets.

If 5+5=10 and this theory holds true, the second-half of 2022 could be just as bad (or worse) than the first.