How to protect portfolios from rising oil prices

COMMODITIES

With a fragile recovery in progress, high oil prices pose a threat to financial markets. Sophie Chardon, quantitative economist at Natixis, explains how to protect portfolios.

Prescribing the same medicine because the symptoms are the same is unlikely to work if the underlying malaise is different. The same is also true for investing. High oil prices usually hit GDP, but any hedging strategies against high oil prices must take account of their causes – and particularly whether high prices are the result of demand or supply-side factors. That said, as with the patient awaiting diagnosis – it is not always easy to tell. Most mistakes, however, can be avoided by looking for tell-tale trends instead of examining the variables. Tell-tale trends Past trends r...