Lower Oil Helps Retail

One of my goals with this blog is to help people think properly about investing. For example, I often caution against folks looking to predict the next big bubble.

The following is a good example of how people ought to approach investment analysis. Over the last two years, oil stocks (black line) have not done very well relative to the broader market. At the same time, the retail sector (blue line) has done quite well.

These two events are related. Lower prices at the pump act like an immediate tax cut for consumers. What do they do with that money? They spend it. Of course, there would be times when consumers simply sit on that cash. Please note that we’re talking about relative performance. Where retail leads the market is exactly where oil falls short.

Check out this chart:

Posted by Eddy Elfenbein on November 19th, 2013 at 12:33 pm

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.