I’m not the most active person on LinkedIn, more of a quiet observer who scrolls now and then. I do make new connections occasionally (selectively, of course). At the risk of upsetting some people, LinkedIn can sometimes feel like a stage where many are more interested in “showing off” than sharing real insights or adding value.
One person I always make a point to follow is Denise Chisholm. Her insights are consistently outstanding, often making me pause, think, and challenge my own views. Here is another timely piece from her.
Here is a section:
Conflict in the Middle East drove oil prices sharply higher – crude was up over 7% last Friday alone. That kind of move is rare, happening less than 1% of the time. While the cause varies – weather, war, recovery or even oil bear market dynamics – the result is the same – rising energy costs. So, what happens next? If you are worried this will disrupt the momentum in the market, history says it is less likely than you might think.
In fact, the 12 months following a 7% daily surge in crude tend to see double the average equity market return. The same is true across 3-, 6- and 9-month windows. It does not matter much whether the catalyst was geopolitical or otherwise. Even more counterintuitive that Energy usually does not lead after a move like this historically. The best performing sector in the aftermath is not Energy – it is Consumer Discretionary. That does not mean geopolitical risk does not matter. It just means that other things – earnings trends, credit conditions, liquidity – often matter more.
There is another layer here too. The oil market itself has changed. The US is no longer a net importer. Since 2012, domestic production of oil and natural gas liquids (NGLs) has nearly tripled. That matters – there is more supply on hand and fewer price spikes as a result. This means when we do get one, it tends to have a weaker and more asymmetric impact on both inflation and stocks.
