Just when you thought the climbing oil prices would drag our economy and stock market down to the abyss, it turns out the dark clouds might have a silver lining after all.
The big buzz in the financial world?
WTI crude oil’s jaw-dropping leap of 17%, hitting a staggering $91 a barrel.
Most of us, (yes, you and me included), believed that when oil prices soar, our wallets shrink and our stock market plummets, right?
WRONG.
Before you cry foul, listen to this: While the Fed has been chilling on interest-rate hikes, thanks to a dip in broader inflation, guess what happened?
Consumer demand stood strong.
Even with the haunting specter of a recession looming over, retail sales in August shot up 2.5% from last year.
Mind. Blown.
But here’s the juicy part: Just because the S&P 500 has dipped about 3% since August (coinciding with the oil price hike), doesn’t mean the two are dance partners.
Julian Emanuel, the genius strategist from Evercore, drops a truth bomb: “Correlation is not always causation.”
Translation?
The stock market’s stumble may not be oil’s fault after all.
Now for a mind-bending twist from the history books.
Between 2010 and 2014, while oil prices skyrocketed from a humble $70 to an eye-watering $100 a barrel, the S&P 500 didn’t crash and burn.
Instead, it soared by about 50%.
Why?
Higher oil prices sometimes go hand in hand with a booming economy, rocketing consumer demand, and swelling corporate profits.
During that period, not only did the economy grow, but consumer confidence also made a giant leap.
The truth is, when oil prices rise, it can mean more jobs, better incomes, and a nation full of people confidently swiping their cards.
Yes, a heftier oil price can be a burden, but it could also hint at a thriving stock market.
So, next time you see the oil price meter ticking up, remember: It’s not all doom and gloom.
In fact, it could be a sign of greener pastures ahead.
