Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Thursday, 19 March 2020

Oil Price Drop = Stock Market Drop?

Source: 9gag

The stock market is obsessed with oil prices, with news outlet making end-of-the-world kind headlines every time oil prices start crashing down.
But does falling oil prices really have a positive or negative impact on the stock market?
We dug into the data to find out.

Crude Oil price chart from 1990 to 2020
Source: Macrotrends

S&P500 price chart from 1990 to 2020
Source: Yahoo Finance

Recommended Read: CPF: 4 in 1 Insurance Plan

After looking through the oil crashes from 1990 to 2020 and comparing them against the S&P500 performance, the conclusion we have is: CRUDE OIL PRICE HAS NO CORRELATION TO STOCK MARKET PERFORMANCE!
Crude oil prices and the S&P500 has a correlation value of -0.02, which means neither has an impact on the other.
Furthermore, not all crash in crude oil prices occurred are accompanied by a recession in the US economy.

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