Oil moves closer to stocks in 2025 as Trump tariffs roil markets
A positive correlation between global oil benchmark Brent crude and U.S. equities has reemerged in 2025, reflecting concern about the slowing economy and the impact of U.S. President Donald Trump’s trade wars.
Asset classes moving in tandem presents a conundrum for money managers, challenging ideas like commodities are a good way to diversify portfolios as they are less likely to fall at the same time as stocks. The current environment with widespread growth fears has spurred investors to seek new strategies.
Since Trump took office on January 20, crude and U.S. stocks have moved in lockstep, as concern about the outlook for the global economy and growth have rattled sentiment across markets.
The one-month correlation between the two – a metric that reflects how much two assets tend to follow one another, with -1.0 reflecting no correlation at all and 1.0 reflecting a near-perfect correlation – rose to as much as 0.9 in March.
“The oil price is moving today not because of inflation, but because of growth and that’s why oil and equities are becoming more correlated,” said Shaniel Ramjee, co-head of multi-asset funds at Pictet Asset Management in London.
A positive correlation between oil and equities is not that rare, however. Brent and the S&P500 were strongly correlated for most of the June-August period last year.
Tim Evans of advisory firm Evans on Energy said trading the correlation presented at least two difficulties – uncertainty over how long it will last and whether it’s any easier to forecast direction of the S&P 500 or the oil price.
Source: Globalbankingandfinance
