Oil Prices and Equity Markets

John Robertson

PortfolioDirect

Sliding oil prices have been setting the tone for equity markets. There is no history to suggest a permanently high correlation. Oil prices could remain low as equity prices recovered and vice versa. Changes in other intervening factors in a complicated global economic setting will break the nexus eventually. Market commentators habitually look for simplistic explanations for complex interactions among huge numbers of economic variables. Oil prices are being used as an indicator of currently legitimate worries about global growth outcomes. This will continue until it stops and until those preoccupied with oil prices latch onto another overly simplistic explanation for why markets are behaving as they are. This is the concluding observation of a commentary on the connection between oil prices and the S&P 500 based on 10 phases in oil prices (WTI) since the first oil price shock in the early 1970s. (VIEW LINK)


John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...

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