Tracking equities as a real time demand proxy may make sense in normal times when demand is dictated on the margin and capital structures and credit markets are operating within a familiar band. However, these days the macro factors will continue to drive the long-term trends (see the minimal reaction to OPEC shifts, collapse in Baltic Dry, dismal export numbers globally). To that end, every false equity driven "recovery" is bound to get smacked back down until the fundamentals are fixed.
Eventually, oil is going to decouple from equities and when it does it's going to break long faster than equities. We'll cover the specific macro factors that need to be addressed and consequently will serve as important indicators for an oil recovery in another post.Sphere: Related Content Print this post