Im sure that there will be several comments after this one to hash out the details but I would attempt to keep this one simple by saying that I think it boils down to simple supply and demand. Apparently the market would be doing even better if oil was down but at this time it would appear that stocks are keeping up pretty well because they have a good amount of steam behind them. I think there was a wide sense of a bottom after the stocks began to recover from the huge selloff earlier this year, then word of recession spread and even then the market didn't seem to react very strongly to those allegations. It would seem that greed is winning over fear. Let me also say that since earnings season has begun alot of peoples fears were not realized. I think most stock traders were preparing for the ugliest. I think the general stock market attitude right now is, " Hey, maybe this won't be that bad." Granted, the long term outlook for U.S markets has not been gorgeous, but I think there was a point where everyone was stricken with a disproportionate amount of fear, and the natural metamorphosis of unrealized fear is that it quickly and painlessly becomes greed.
America imports about 15 million barrels a day. At $115 per barrel that is 1.7 billion dollars per day or 630 billion dollars per year. The world takes the $1.7 billion and some of that is invested in America. Some goes to real estate, some to debt instruments, and some to equity assets. The portion that finds its way into stocks is what keeps the market from falling. Americans literally burn up $1.7 billion per day through their exhaust pipes. The cash goes overseas and becomes the wealth of a foreign country. The foreign country then uses the cash to buy assets across the world. This is the largest transfer of wealth in the history of the world. Allah be praised.
The oil prices are quoted in dollars. The drop is more about a weak dollar than rising oil.
Most that actually use oil have long term contracts in place and are not paying $115 a barrel yet. Except to make up any slight differences they were expecting, but of course they are going to do all they can to conserve and sell their extra at this point in time.
The question assumes there is a high inverse correlation between Oil and the stock market. In fact the CSI correlation software shows it is only -.741. This rating shows the correlation is unreliable.
Oil is not the only commodity at an all time high. There are many more examples e.g copper,corn,Euro vs $.
Inflation is in reality far higher than reported via CPI and RPI and in some countries extreme measures already being taken to try and control this e.g. Iceland has a bank rate of 15%.
Highly likely US attempt to stimulate economy with low interest rates will fail, employment will fall, inflation will rise and for sure as anything stock markets will come crashing down. Unfortuately I can not say when this will occur it could happen in a few months or may take years. In the meantime I have put all long term equity accounts into cash and am enjoying the volatility by day trading comodities.
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Most that actually use oil have long term contracts in place and are not paying $115 a barrel yet. Except to make up any slight differences they were expecting, but of course they are going to do all they can to conserve and sell their extra at this point in time.
Inflation is in reality far higher than reported via CPI and RPI and in some countries extreme measures already being taken to try and control this e.g. Iceland has a bank rate of 15%.
Highly likely US attempt to stimulate economy with low interest rates will fail, employment will fall, inflation will rise and for sure as anything stock markets will come crashing down. Unfortuately I can not say when this will occur it could happen in a few months or may take years. In the meantime I have put all long term equity accounts into cash and am enjoying the volatility by day trading comodities.