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FSN: Oil Drop is Big Boon for Global Stock Markets, if it Lasts

Friday, November 28, 2014 18:26
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Be prepared for the next great transfer of wealth. Buy physical silver and storable food.

Morgan Stanley said the over-supply in the global crude market is “vastly overstated”, and likely to reverse soon.

by Ambrose Evans-Pritchard

Tumbling oil prices are a bonanza for global stock markets, provided the chief cause is a surge in crude supply rather than a collapse in economic demand.

HSCB says the index of world equities rose 25pc on average over the twelve months following a 30pc drop in oil prices, comparable to the latest slide. Equities rose 19pc in real terms.

Data stretching back to 1876 is less emphatic but broadly tells the same tale. The S&P 500 index of Wall Street stocks rose by 11pc on average. The equity rally of 1901 was a corker.

Yet there were big exceptions. Stock markets continued to fall by 23pc in 1930 after the oil price crash. Much the same happened after the dotcom bust in 2001.

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