The Stock Stumble

The tumult of the last few days on Wall Street seems to reaffirm the old adage: “the stock market has correctly predicted nine of the last five recessions.” In March, the stock market was initially rattled by the demise of Bear Stearns, arguably the largest banking casualty of the credit crisis before this past week. Investor confidence was certainly tested as stock markets slid and widely-held equities plummeted in value on Monday. By Tuesday, the Federal Reserve’s decision to aid insurance giant AIG seemed to stave off a broader meltdown. Stock markets rebounded by the end of the week proving that the impending sense of doom might have been slightly exaggerated. The chart below shows the Standard & Poors 500 index and the monthly average Worldscale rates for VLCCs trading Arabian Gulf to the US Gulf. While it is difficult to see a connection between these two markets on a daily basis, confidence in the economy in the long-term certainly does directly impact shipping.