Oil Price Surge Tied to US Stock and Bond Declines
Rising oil prices are increasingly linked to declining US stocks and long-term Treasury bonds. According to Dow Jones Market Data, the correlation between WTI crude oil and the S&P 500 index fell from nearly neutral on February 27 to minus 0.48 by the end of April. This means that as oil prices rose, stocks declined.
Nomura Securities International strategist Charlie McElligott said that oil and energy had become the defining factor in the current global macroeconomic risk regime. Previously, more expensive oil could support stocks because its rise was associated with more resilient demand in the economy.
The trend is also observed in long-term US Treasury bonds. The 63-day correlation of WTI with the iShares 20+ Year Treasury Bond ETF fell from minus 0.15 on February 27 to minus 0.55 on Tuesday morning.