2008 was the beginning of the credit crisis, but there was also a concern about the high price of crude. Speculators were putting money to work in the commodity for several reasons:
- A declining US stock market
- Bonds were getting hit due to the start of the credit crisis
- High demand for the commodity in emerging countries, as they were performing better then the US
The US stock market may have been declining because of the beginning of the credit crisis, but also due to the increasing price of crude. Consumers had to pay more to drive. Companies had to pay more in shipping costs. The increased cost for consumers to go out, buy products that are increasing in value does did not bold well for the demand for goods, thus cutting the companies bottom line. Cutting companies bottom line also does not do US equities any favors. The correlation, US equities down/crude up, was very much intact, but it would not last forever.
The chart below shows crude (top line) & US equities (S&P) (bottom line). The correlation became US equities up/crude up. Upper and lower trend lines were drawn on the chart thus further confirming the trend. The rational towards this is increasing US equities means a recovery in the recession. That means the consumer will go out, spend, and travel. That will cause an increase in demand for crude.