Crude Prices & the Stock Market: A Wild Ride

by Elizabeth Alford on August 31, 2015

As August draws to a close, some investors are wondering what hit them. The up-and-down motion of crude oil prices and the recent trend in the stock market are enough to make even seasoned investors squeamish. So what exactly is going on?

Related: Oil Plunges to Six Year Low

After surviving one of the wildest weeks on record, the stock market ends its worst month since 2012. Analysts blame conditions on a slowdown in China’s economy and concerns that the Federal Reserve will raise interest rates. Some speculate things won’t improve soon.

Scott Clemons, chief investment strategist at Brown Brothers Harriman Private Bank to the New York Times  “I think the investor complacency we had earlier in the summer has made this market primed to overact to basically anything out there.” 

U.S. crude oil prices also had a crazy ride this month, hitting its lowest price of the 21st century last monday before shooting back up almost $10 a barrel within three days. The commodity ends the month at close to $50.

The tie between crude prices and stock market fluctuation is tenuous, but the recent turmoil in financial markets has had a particularly big impact of the price of oil. The slowdown in China and the panic of other emerging markets contribute to the volatility. This latest surge is an example of what can happen when investors are lured by the swings in oil market and start making bets on pricing.

Anthony Starkey, energy analysis manager for Bentek Energy commented that “It’s really being driven by the speculators. That’s why we’re seeing such wild swings.”

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