Dow Jones Industrial Average Surging Despite Oil Collapse

Conclusion #1. During the oil-price declines, the three stock sectors that gave investors the best (and most consistent) performance were:

  • Health care, up an average of 60%!
  • Technology, up an average of 64%!
  • Financials, up an average of 45%!

Conclusion #2. Move the clock ahead three months after oil prices hit rock bottom … and that’swhen you start to see the benefits of cheaper energy flowing into the consumer economy.

Result: The two stock sectors that gave investors the best and most consistent performance within the first three months after oil hit bottom were …

  • Consumer discretionary stocks, up 13.6%.
  • Financial stocks, up 8.1%.

(That’s in addition to the 45% rise we talked about above, which they enjoyed during the oil-price decline).

Conclusion #3. Next, fast forward 12 months after the oil-price bottom, and you see that the positive impacts on the consumer economy continue to pile up, with …

  • Consumer discretionary, up 24.2%
  • Technology, up 35.1%

(Again, that’s in addition to the rises they enjoyed during the oil-price decline.)

How does all this compare to where we are now in the current oil-price decline? That leads me to …

Conclusion #4. Although it’s still too soon to say oil has hit bottom, what we’ve already seen during the latest oil decline confirms the pattern of earlier bull markets: Since oil began its plunge last year, the best performing sectors have been the same ones that popped up at the top of the charts in previous oil crashes. They are …

• Health  care up 12.4%
• Technology up 9.4%
• Cons. Staples up 8.8%
• Financials up 8.7%
• Cons. Discretionary up 8.2%

Conclusion #5. During bear markets, driven by factors that are completely independent of oil (like a real-estate bust), all bets are off. In the 2008 meltdown, for example, almost everything got clobbered — not just real estate, but also stocks, gold, oil and other commodities.

But after the 2008 oil-price decline, if you look ahead just six months after oil hit rock bottom, you see nearly all sectors enjoying a rapid recovery. And by twelve months out, you see …

• Financials up 54.0%
• Technology up 51.1%
• Cons. discretionary up 50.7%
• Materials up 43.0%

Our final conclusion: This validates precisely what our team has been telling you:

1. The oil-price plunge is a big extra bonus — a great gift.

2. Oil-price crashes have never caused stock market crashes.

3. But history also shows that we must always remain vigilant regarding the dangers of a bear market caused by other factors — and be ready to change course promptly when and if that time comes.

Martin D. WeissThis article is brought to you courtesy of Martin D. Weiss

Money and Markets is a free daily investment newsletter published by Weiss Research, Inc. This publication does not provide individual, customizedinvestment or trading advice. All information is based upon data whose accuracy is deemed reliable, but not guaranteed. Performance returns cited are derived from our best estimates, but hypothetical as we do not track actual prices of customer purchases and sales. We cannot guarantee the accuracy of third party advertisements or sponsors, and these ads do not necessarily express the viewpoints of Money and Markets or its editors.

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