As seen in the chart below, each time the RBOB unleaded gasoline futures (lower chart) have risen above 325, the S&P 500 (upper chart) has seen corrections of varying sizes, denoted by the red arrows. Granted, a lot of extraneous factors were at play in 2008 when prices were falling. But pain at the pump didn’t help then, and it certainly won’t help this time around. Now this is not meant to suggest you run out and sell your stocks if unleaded gasoline futures again rise above 325.
However, there is enough of a correlation over the last five years to suggest the market, as measured by the S&P 500, may retreat to some degree. Thus, depending on your tolerance for a market correction like that of 2008 (7 to 17 %), you might give some thought to a few tactical shifts, if a continued rise in the RBOB unleaded gasoline futures provides the impetus for such a correction.
With the summer driving season around the corner, our bet is it happens.
S&P 500 Index and RBOB Unleaded Gas Futures