It seems the market tends to believe an appreciable decline in oil is in a vacuum and not the net result of slowing economic activity. I say this because each time we see oil get poleaxed retail stocks rally.
Logically this is a consistent trade. The lowest energy and other commodities go, in theory, the more expendable income plebs will have. The problem with this theorem is that is all but rules out economic hardship and assumes once oil drop the economy will come right back.
Naturally this is possible, but not likely given the state of rates.
HOWEVER, should we see this oil price plunge even further into the $80s, we might begin to see the CPI plunge and give the Fed an excuse to pause, which would provide markets with an excuse to rally.
I am not saying this is what will happen, only describing the rationale.
At the moment, I am heavily long retail names, still hedged via TZA.
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Ukraine is out of the “news” and we shall, from here ’till November, be fed a narrative which will include enough “data” for a less hawkish Fed. Nothing matters except the narrative. (Oil is obviously in for a severe shit kicking). The recession likelyhood has gone way up, again according to some “knowledge” resembling the narrative.