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Is Energy The Place For Investors To Hide As Stocks Tumble?


It has been a rough couple of weeks for stock investors. The S&P 500 lost close to ten percent from its August 16th high to its Thursday low as the market came to grips with the reality of the Fed’s rate hikes and their intention to continue on that path until inflation is beaten, even if that means risking a full-blown recession. Things came to a head at the end of last week when Jay Powell, in a speech at a Jackson Hole, Wyoming summit, indulged in some serious central-bank-splaining as he told the smart people on Wall Street just that, that rate hikes could slow economic growth.

Given that a recession is now a real possibility, the immediate future for the stock market now looks a little bleak, and that has led to the usual rush of articles and TV interviews giving advice as to where investors can hide. Whenever that happens these days, it seems, energy is the first place suggested. The theory is that it is a recession proof sector. I mean, we all need energy, right, whatever the economic conditions? The problem, though, is that the main influence on stocks in the energy sector isn’t demand in the economy, it is the price of oil, and the prospects there aren’t too hot right now.

Of course, oil prices themselves are sensitive to actual and projected economic growth, but that isn’t the only thing that moves them. There is a supply side to the equation as well and, for a while now, supply has been restricted. The obvious reason for that is the Russian invasion…

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