Strategies · Core
Crude Oil Predicts Equity Returns
Time equity beta with oil’s recent move or level — a macro overlay that treats crude as a growth/inflation signal.
Definition
A typical rule: cut equity when oil’s signal says growth scare or inflation shock (specifications differ: change, shock vs inventory, or a threshold). It is a one-variable timing model. Regime (demand vs supply oil shock) decides the sign.
Why it matters
Oil is a fast macro print. Using it blindly as ‘risk-off when oil down’ fails on supply shocks (equity up, oil up).
Case
2022: oil up, equities down (inflation). 2020: oil down, equities down (demand). Same indicator, opposite equity mapping unless you split the shock.
How to read it
Demand vs supply identification. A single correlation in one decade is not a strategy.
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