Have Oil and Equity Markets Moved Inversely?



US equity indexes

Between April 12 and April 19, 2018, US equity indexes’ correlations with US crude oil June futures were as follows:

  • the S&P 500 Index (SPY) at -23.9%
  • the S&P Mid-Cap 400 Index (IVOO) at -25.5%
  • the Dow Jones Industrial Average Index (DIA) at -45.7%

These indexes have energy exposure of ~5.5%, ~3.8%, and ~5.2%, respectively. In the trailing week, these three equity indexes rose 1.1%, 1.2%, and 0.7%, respectively. US crude oil June futures rose 2.1% in this period.

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Have oil and the equity markets moved inversely?

Based on the correlations, these US equity indexes could have either ignored or moved inversely to oil’s moves. Though sentiments in oil and the equity markets can be related, individual fundamental factors generally dominate the individual performances of oil and the equity markets.

US crude oil prices were buoyed by strong fundamental factors and bullish EIA inventory data. We discussed these factors in part one of this series. The ease of geopolitical factors after the US-led strikes over Syria on April 13, 2018, has supported the equity markets. Needless to say, the current earnings season has also impacted equity markets.

Sector ETFs

Between April 12 and April 19, 2018, the Energy Select Sector SPDR ETF (XLE) rose 4.3% and was the top performer among the SPDR ETFs, which break up the broad market’s performance into subsectors. The Consumer Staples Select Sector SPDR ETF (XLP) fell 1.9%, the only SPDR ETF on our list to close in the red in the trailing week.


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