« Sneak Peek at Weekend Reading | Main | Losing Money on Every Home Sale, etc. »

Latest Stories

• Excel Wankers and Recession Averages
• Sorry, New York is Closed. Check Back Later.
• Catching Falling 2009 Earnings Estimate Knife
• Survivorship Bias in Global Markets
• Talking Positions on a Lazy-ish Retirement Portfolio

August 4, 2008

Oil vs. the S&P 500: Correlation Breakdown?

This year the major U.S. markets have been driven largely by what has happened in oil markets. Higher oil means lower stocks, and vice-versa. Right?

Well, here is a graph of the correlation between oil futures and the S&P 500 on a daily basis for the current calendar year. As you can see, there have been two periods -- February and June -- during the year when oil really drove the S&P 500 down, and one period -- April -- when the S&P 500 rose merrily, despite higher oil prices.

Of late, however, the relationship between oil and the markets seems to have begun to break down -- which helps explain today's market weakness, despite a $4 drop in oil prices.

Sphere It   |   Digg it   |   Bookmark it   |   Stumble it   |   Facebook it