Do consumers spend more when gas prices are lower?

The jury is still out on this question, even though we’ve been debating it since the oil swoon began in the second half of 2014.

But if we don’t know whether or not consumers benefit, we know for sure that consumer stocks do. The market has decided that lower gas prices are good for consumers’ discretionary spending. Here’s a chart from LPL Research on the inverse correlation between the S&P 500’s Consumer Discretionary sector vs the price of a barrel of oil:

Lower oil prices. Relative performance of consumer discretionary has shown inverse correlation to oil prices [Figure 2]. This factor, which certainly contributed to the sector’s strong performance in 2015, is gaining intensity as oil prices retest lows from earlier this year. Lower prices at the pump should continue to provide support for consumer discretionary spending during the ongoing summer driving season. Although a big oil price bounce that could cause sector performance to reverse is possible, we believe it will take a while for oil prices to break out of the current range and return to the $60s. See our Weekly Market Commentary, “The Bright Side of Cheap Oil,” January 12, 2015, for more on this relationship.

xly vs crude

Source:

What we can learn by going back to school
LPL Research – August 11th, 2015

 

 

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. bitcoin evolution a scam commented on Sep 30

    … [Trackback]

    […] Information on that Topic: thereformedbroker.com/2015/08/11/do-consumers-spend-more-when-gas-prices-are-lower/ […]

  2. Dank Vapes flavors commented on Oct 13

    … [Trackback]

    […] Find More here to that Topic: thereformedbroker.com/2015/08/11/do-consumers-spend-more-when-gas-prices-are-lower/ […]

  3. Sex commented on Oct 29

    … [Trackback]

    […] There you will find 9175 more Information to that Topic: thereformedbroker.com/2015/08/11/do-consumers-spend-more-when-gas-prices-are-lower/ […]

  4. nz of wines commented on Dec 21

    … [Trackback]

    […] Find More Info here to that Topic: thereformedbroker.com/2015/08/11/do-consumers-spend-more-when-gas-prices-are-lower/ […]

  5. 메이저놀이터 commented on Dec 25

    … [Trackback]

    […] Info to that Topic: thereformedbroker.com/2015/08/11/do-consumers-spend-more-when-gas-prices-are-lower/ […]

  6. wigs commented on Jan 01

    … [Trackback]

    […] There you can find 89969 additional Information on that Topic: thereformedbroker.com/2015/08/11/do-consumers-spend-more-when-gas-prices-are-lower/ […]

  7. Software Testing company commented on Jan 12

    … [Trackback]

    […] Here you will find 7643 more Info to that Topic: thereformedbroker.com/2015/08/11/do-consumers-spend-more-when-gas-prices-are-lower/ […]

  8. AEG HKP65310FB manuals commented on Jan 21

    … [Trackback]

    […] Find More Information here to that Topic: thereformedbroker.com/2015/08/11/do-consumers-spend-more-when-gas-prices-are-lower/ […]

  9. my blog commented on Feb 03

    … [Trackback]

    […] Find More to that Topic: thereformedbroker.com/2015/08/11/do-consumers-spend-more-when-gas-prices-are-lower/ […]