Low prices to fill up the gas tank should mean more money in people’s wallets to spend on other things, but the market is having a bad reaction for two key reasons, Curvall said.
The first is whether the contraction in the energy sector due to low prices will spill over to the rest of the economy, in a similar way a widespread wave of mortgage defaults infected the larger economy at the beginning of the 2007 Great Recession, he said.
“Financial markets are currently worried about the potential for an energy debt crisis,” he said.
But Curvall thinks the shocks this time can be contained in part because banks have more capital to handle it now.
“It’s our view at the bank that the credit risk is in fact manageable,” he said.
Another major concern Curvall sees investors taking out on the stock market is whether a hurting oil and natural gas industry is a sign of a struggling global economy.
However, Curvall and Fifth Third have a positive outlook on that point too.
“We do believe that the drop in energy prices is a supply issue… rather than less demand for oil,” he said.
It’s not all doom and gloom, he argues. As companies have spent recent weeks sharing their financial results from 2015, the biggest common factor affecting the numbers seems to be a strong dollar, which means international earnings are translated to less in dollar terms, he added.
And consumer spending is all about confidence. Whenever the market takes big downward leaps, the average person might hold off on spending their money until there’s more stability, even if they have the wherewithal to buy more, he said.
“The big picture to me is there’s no red flags out on the horizon that say to me a recession is imminent, and I think investors would do very well to remind themselves of that,” he said.
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