Crude Oil Is In A Bear Market; Now What?

It has been a rough year so far for crude oil with yesterday’s close at a fresh nine-month low officially pushing the commodity into bear market territory. Sparking much of the continued weakness is the usual worry that rising supply from the U.S. and Libya will continue to offset production cuts from the Organization of Petroleum Exporting Countries (OPEC).

Get The Full Ray Dalio Series in PDF

Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Per Ryan Detrick, Senior Market Strategist, “Crude oil moving into bear market territory has many concerned that this is a sign of a potential global economic slowdown. We don’t see it that way, as this pullback has been, and continues to be, supply-driven, as opposed to demand-driven. Also, crude oil in a bear market is not uncommon, as 35% of the time since 1985 it has traded at least 20% off its trailing 52-week high.”

Voss Capital is betting on a housing market boom

Housing MarketThe Voss Value Fund was up 4.09% net for the second quarter, while the Voss Value Offshore Fund was up 3.93%. The Russell 2000 returned 25.42%, the Russell 2000 Value returned 18.24%, and the S&P 500 gained 20.54%. In July, the funds did much better with a return of 15.25% for the Voss Value Fund Read More


The last time crude oil was officially in a bear market was in early August of last year. As the chart below shows, this was one of the longest streaks without crude oil having a bear market.

Crude Oil Bear Market

So, what does it mean? Crude is in a bear market; so what? Well, historically the future returns have been much better when crude was in a bear market than when it wasn’t. In fact, a year out, crude has been up 18.1% on average when it was in a bear market versus up only 1.1% if it wasn’t.

Crude Oil Bear Market

As we noted in our newly released Midyear Outlook 2017: A Shift In Market Control publication, one of our favorite plays in the energy group is via master limited partnerships (MLP). Overall, the Trump administration’s stance on energy deregulation is supportive and yields on MLPs remain very attractive, though further crude oil weakness and interest rate risk remain potential headwinds. For a more detailed look at MLPs, check out this recent Weekly Market Commentary.

Article by LPL Research

Previous articleUber’s Bad Week: Doomsday Scenario Or Business Reset?
Next articleChartBrief 87 – 2 Crude Oil Tactical Indicators To Keep Front Of Mind
LPL was founded with a pioneering vision: to help entrepreneurial financial advisors establish successful businesses through which they could offer truly independent financial guidance and advice. Today we provide an integrated platform of proprietary technology, brokerage, and investment advisory services to over 13,500 financial advisors as the nation’s largest independent broker/dealer,* making us a leading distributor of financial products in the United States. In addition, we support over 4,000 financial advisors with clearing services, advisory platform, and technology solutions. Even as our firm has grown over the years, we remain singularly focused on helping financial advisors to manage the complexity of their investment practices so they can better serve their clients in achieving important financial goals. And, because we do not offer proprietary products, LPL enables the independent financial advisors, banks, and credit unions with whom we partner to offer their clients truly objective, conflict-free advice. Our open-architecture platform provides our customers with access to thousands of commission, fee-based, cash, and money market products manufactured by hundreds of third-party product sponsors.