How Oil Prices Influence the Stock Market: Myths vs. Reality
It is a commonly held belief that high oil prices have a direct and negative impact on the U.S. economy and the stock market. A study by the Federal Reserve Bank of Cleveland, however, suggests that oil prices and stock prices actually show little correlation over time. Furthermore, analysts typically face challenges when trying to predict the reactions of stock prices to oil price changes. Broadly, though, one sector that is known to be greatly influenced by the price of oil is transportation, which relies on petroleum fuel as a major input.
Key Takeaways
- The Federal Reserve Bank of Cleveland found little correlation between movements in oil prices and the stock market.
- High oil prices raise input costs, yet the stock market doesn’t…
