Oil vs. the S&P500

Includes: DBO, DIA, OIL, QQQ, SPY, USO
by: Paul Kedrosky

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 during the year when oil really drove the S&P 500 down, and one period 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.


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