Oil → UK stocks

Common explanation (Knock-on · same direction): Energy and materials shares weigh heavily in the UK market.

This issue: Oil at 72 (warm), UK stocks at 58 (neutral) — at least one is in the neutral range (40⁠–⁠60), so we make no call this issue.

Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.

Where it stands now

Where the two indicators stand this issue

Oil: 62.8% above its 10-year average. UK stocks: 39.3% above its 10-year average, about as far above as usual.

Tests

Does this link hold up?

Common explanationEnergy and materials shares weigh heavily in the UK marketSource: Bank of England, “Monetary Policy Report - May 2022” (2022).
Tested against our dataAgreement between the positions of Oil and UK stocks (same month), measured in the direction of the common explanation: −0.47. Looking at every 5-year period (shifted one year at a time), the two moved in that direction in 23 of 42. In most periods the two moved the way the common explanation says, but over the whole history the direction is the opposite: the relationship may have flipped in some eras.Our data show the opposite
Periods when it did not holdAcross 42 5-year periods, out of step in 1979⁠–⁠2003 and 2009⁠–⁠2015.

History

The two lines, overlaid

Data: World Bank Pink Sheet (CC BY 4.0); OECD Main Economic Indicators (share prices). Positions: our calculation.

OilUK stocks

Limits

What this card cannot tell you

Moving together does not prove that one causes the other.
Links change over time; periods when this one did not hold are listed in full.
This is the historical record, not a forecast.

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