Financial Markets, Oil Prices, and Supply-Side Risks

Thomas Mertens and Wesley Wasserburger

FRBSF Economic Letter, 2026, vol. 2026, issue 21, 6

Abstract: The relation between stocks and bonds indicates whether supply or demand shocks dominate the risks to economic activity. After two decades of concerns primarily about changes in demand, the stock-bond correlation recently flipped, suggesting that the perceived source of risk to the economy has shifted towards supply shocks. Other financial correlations, such as the stock-oil correlation, also changed accordingly and thus agree with this interpretation. In line with this evidence, financial market pricing now indicates that elevated oil prices and potential inflation are prominent sources of risk.

Keywords: oil prices; financial markets (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.frbsf.org/wp-content/uploads/el2026-21.pdf PDF - view (application/pdf)
https://www.frbsf.org/research-and-insights/public ... d-supply-side-risks/ FRBSF - view (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfel:103632

Ordering information: This journal article can be ordered from

Access Statistics for this article

More articles in FRBSF Economic Letter from Federal Reserve Bank of San Francisco Contact information at EDIRC.
Bibliographic data for series maintained by Federal Reserve Bank of San Francisco Research Library ().