Oil prices go up, stock prices go down. Oil prices go down, stock prices go up. I’ve been hearing this on the news a lot recently, and it seems to be borne out in reality, at least on a gross, general scale. Obviously, taking a long-term view, oil prices and stock prices are not in strict (inverse) lock-step, since oil recently hit an all-time high and stocks are by no stretch at a bottom. But still, in the recent short-term, as oil went up, stocks came down, and vice versa.
The question I have is, of course, why? What’s the relation between the two, or the market forces that cause stock prices to fall as oil prices are going up? Are there huge numbers of people that sell their stocks to buy oil futures, then as oil prices start to fall they sell the oil futures and buy stocks again? That seems hard to believe (that there would be enough people or institutions doing that on a large enough scale to significantly affect the prices).
From what (extremely) little I can deduce from the news, it seems more like it’s just an “emotional” or knee-jerk reaction, that lots of investors think, “Oil is going up, better sell some stock.” But if that’s true, it’s even more puzzling to me as, again, I don’t see why there should be any relation between the price of oil and whether it’s good or bad to be holding stocks.