The Word is Spurious

The lockstep moves in the price of crude oil and global equity markets brings to mind the old adage ” Don’t confuse correlation with causation”. But, in a world where algorithms drive markets, the fundamental underpinnings behind a specific correlation are completely irrelevant. In fact, as the Crude/Equity correlation has become more ingrained, we have been constantly bombarded with commentary on how weak crude oil prices may actually spur a global recession. However, in our estimation the weakness in global capital markets has less to do with the price of crude oil, and more to do with the sudden realization that Central Bankers have completely jumped the shark. However, much as Fonzies hokey shark episode marked the demise of a TV classic, the move towards negative interest rates by Japan and others is a clear demarcation between rational and irrational monetary policy.