Business
Markets Are Feeling the Pain. Why It’s Not Time to Panic Yet.
Stock markets are suffering from higher oil prices, but investors still aren’t panicking. There are three factors still supporting equities, according to Deutsche Bank strategist Henry Allen.
Historically, higher oil shocks only lead to a significant stock market drop when at least one of the following conditions happens–prices rise more than 50% for several months, the shock forces central banks to pivot to fighting inflation, or the shock tips the economy into recession or a meaningful slowdown, the Deutsche strategist argues.
“Markets are not expecting this energy price shock will be sustained. We haven’t yet seen a hawkish pivot from central banks. And given how early it is, we haven’t yet seen any obvious signs of data deterioration,” Allen wrote.