Until recently, revealing to people that I wrote about and traded in the energy sector invariably provoked the same response. Their jaws would drop, and they would look at me in disbelief, asking whether or not I was completely sane. That was understandable, I guess, if somewhat insulting, and despite the fact that it demonstrated complete ignorance of the difference between trading and investing. After all, energy was a sector that had underperformed the market for a decade or more, and, as recently as a year and a half ago, didn’t Jim Cramer say repeatedly and, of course, loudly that energy was “uninvestable”?
Those of us that maintained throughout that that ultimately rapidly expanding demand for energy and a finite supply of oil and gas, still needed in vast quantities even as the world shifted to renewable energy sources, would result in higher energy stock and commodity prices, can be forgiven a little schadenfreude right now. However, what we should be asking at this point is whether or not we can expect the energy sector’s outperformance to continue.
The answer is yes…for a while, at least.
We are in a weird situation right now, where the market and economic data are sending conflicting signals. Stocks have been trending downwards all year, and as we have seen over the last couple of days, every rally is met by heavy selling. And yet the underlying economic and corporate data remain strong. Yes, GDP contracted last quarter…