Until the recent turmoil started in the Middle East, rising oil prices confirmed that the global economy was recovering. So that was good for stocks. Now I’m hearing from our institutional accounts lots of concerns that rising oil prices attributable to supply disruptions in the Middle East could disrupt the global expansion. The S&P 500 and the price of Brent crude oil have been highly correlated over the past two years. In recent days, stock prices have stumbled as the price of oil has soared.
There has also been a strong correlation between the S&P 500 and the price of copper over the past two years. Copper remains near its recent record high, but hasn’t risen recently as the price of oil soared, increasing the risk of weaker global economic growth.