The Strategic View: The Correlation Between Oil & Equities Is Not a Sign of Recession: Time To Start Buying
Comment of the Day

January 27 2016

Commentary by David Fuller

The Strategic View: The Correlation Between Oil & Equities Is Not a Sign of Recession: Time To Start Buying

My thanks to Michael Jones for his excellent report published by RiverFront Investment Group.  Here is a brief sample from the opening:

Based on conversations with our partner financial advisors, one of the most troubling and confusing aspects of recent market volatility is the close connection between the oil market and the stock market.  If oil prices fall during the trading day, then equity prices almost inevitably follow oil lower.

Falling oil prices are typically seen as beneficial to global consumers, and equity prices outside the energy sector historically tend to be largely immune to or even benefit from cheap oil.  The few times in history that oil and stock prices have fallen in tandem were driven by the onset of a global recession.  Thus, despite robust US job gains, improving new home sales, and the positive impact of lower gas prices on their personal finances, investors are increasingly fearful that the close correlation between oil and equities is once again signaling a recession and the potential for a market crash similar to 2008.  We strongly disagree.  

David Fuller's view

This is a well-argued, sensible report by Michael Jones.  I strongly recommend it to our subscribers.

Here is a PDF of the report.

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