Gas Prices and Future Stock Market Returns

Some experts argue that high (low) gasoline prices mean that consumers must allocate more (less) spending power to fuel, and therefore less (more) to other industries and stocks. Do data support this argument? To check, we relate U.S. stock market returns to changes in U.S. gasoline price changes. Using weekly average retail prices for regular gasoline in the U.S. and contemporaneous levels of the S&P 500 Index from late August 1990 through mid-March 2021 (with a six-week gap in gas prices at the turn of 1990 and a one-week gap in the S&P 500 Index in 2001), we find that: (more…)