Impact of another oil shock?

Spot oil compared to market sector performance, S&P 500, January 1st 2008 to October 1st 2008

A key focus of the G20 summit in Mexico City was, of course, The Eurozone crisis. What the media is understating was their focus on oil shocks. Buried in their official communique I found this “We are alert to the risks of higher oil prices and welcome the commitment by producing countries to continue to ensure adequate supply.”

Of course many factors wrt the price of oil can’t be controlled by the producers, and Oil is up almost 10% in the month of February alone. Given this backdrop of rising prices, I thought I’d take a look at the last oil shock we saw, the period January 1st 2008 to October 1st 2008, and evaluate it’s impact on the stock market as a whole, as well as specific sectors.

The chart above illustrates while oil was trading over $100 a barrel, the stock market as a whole lost almost 21%. The worst performing sectors were Telecommunications and Industrials (off some 31%) while three of the ten sectors analysed lost less than the S&P 500. Specifically Consumer Goods (down 9.44%), Health Care (down 12.22%), and Consumer Services off 14.74%). Plan your trades accordingly if you think oil is likely to stay above $100 a barrel.

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