Why Are Stocks Falling in Sync With Oil Prices?

Why Are Stocks Falling in Sync With Oil Prices?

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Lower oil prices are supposed to be good for the economy and stock market because they provide consumers and businesses with more money to spend. But since early November, oil prices and stocks have been moving lower in lockstep, and there’s no telling yet when that might end.

Year-to-date the S&P 500 is down 7% while oil prices have fallen 17.%.

“At this point oil is a one-stop shop indicator for stock prices,” says Nick Colas, chief market strategist at Convergex. “That’s frustrating. It’s almost like we’re beholden to this one commodity.”

More specifically the stock market has been “treating the plunge in oil prices as an indicator of global growth,” says Russ Koesterich, global chief investment strategist at BlackRock. “That’s wrong. Oil is a cyclical commodity. The problem is not [global] demand. The problem is supply.”

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