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Wednesday, March 7, 2012

When are Rising Oil Prices Bad for Stocks?

Not very often, as this chart attempts to show.  Notice the correlation plot in the bottom panel - any significant time spent below zero indicates a negative correlation between the price of oil and the S&P 500.  This has almost always been during a time of rising oil and a falling stock market over the past ten years of easy monetary policy.  The second half of 2006 is an exception, and that did not end so well.  For a more comprehensive explanation of the correlation between commodities and stocks, inflation / deflation, and what to look for at inflection points, please see Chip Anderson at

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