It’s understandable that many investors are a bit down considering the current state of the stock market. Making matters worse, there has been concern about the price of oil within the world of investing. In certain times, there has been a correlation between the price of oil rising and stocks prices plummeting. Considering that, many fear that the stock market is in for extremely tough times ahead. However, many experts feel that the continual rise in oil prices could actually benefit individuals holding stocks in certain sectors.
During February 2016, the price of oil dropped to massive lows. This plunged many within the oil industry into an uncertain future. While many felt the prices of oil would never see $60 a barrel again, the luck of the oil industry would soon begin to change. Currently, the price of oil has seen continuous price increases over the past few years. Many fear that, if these prices continue to increase, it could spell disaster for the stock market.
However, not everyone seems fearful that rising prices will cause a bear market to occur. One expert from Seeking Alpha noted that oil demand is likely to increase by 1.4 million bpd this year. This would mean that demand is still lower than the amount of oil readily available throughout the world. Another factor to consider is that the rising prices of oil will also cause gasoline prices to increase. This could be another factor that helps the stock market to regain its balance.
Where an investor could potentially benefit from this current oil situation is by investing in energy stocks. Industry experts note that the energy sector has a price-earnings ratio of 18.7. This number is notable because it is below both of the five and ten-year averages for this sector. Therefore, investing in these stocks could potentially help an investor reap benefits from rising oil prices.
To summarize, the rise in oil prices has certain people fearing that the stock market is headed for more trouble. However, it’s important to remember that similar events have happened in the past. Oil prices have risen and while the stock market changed for a moment, things eventually went back to relative normalcy. Certain investing experts are recommending looking into energy stocks in order to diversify your portfolio during this time.