02-02-2016, 10:30 PM
Interesting read on the curious connection between oil and the markets
Even casual observers know oil is exerting uncommon influence on stocks. What’s less clear is how the energy market has come to dominate sentiment in industries with seemingly no connection to crude prices. Understanding why oil is casting such a spell is more than an academic inquiry. The reason matters, given how big the moves have been. Almost $1.6 trillion has been erased from U.S. stocks in 2016. If oil is contributing, it’d be nice to know why. Here are four theories on what’s underpinning the connection. They range from a straight economic signal to speculation oil’s plunge threatens to lay low everything up to and including the financial system.
Tracing Oil's Hypnosis of Stocks From Wealth Funds to Junk - Bloomberg Business
Especially in the face of this:
A new note from Francisco Blanch at Bank of America Merrill Lynch, however, puts the oil move into a much bigger perspective, arguing that a sustained price plunge "will push back $3 trillion a year from oil producers to global consumers, setting the stage for one of the largest transfers of wealth in human history."