- Energy stocks have sat out the recent equity rally and now lag badly
- S&P 500 is up 2%, while the energy sector is down 12% for the year
- But that looks likely to change, and energy stocks could see a sizeable rally
- With upside for the S&P 500 capped, energy stocks could show relative strength
- We outline a pairs trade on the S&P 500 and an energy or oil stocks ETF
Hit by low oil and gas prices, energy stocks remain the ugly duckling of the stock market and continue to lag badly, not only year-to-date but since summer 2014. But that seems to be changing.
To put this in context the S&P 500 is 2% higher for the year (although it is uncertain how long that will last), while the energy sector is down by about 12%. Oil-related stocks, of course, make up a good part of the energy sector, and they are also about 12% lower for the year, albeit already well off their August lows.
While the broader equity indices in Europe and the US are largely overbought in the near term, sector rotation has kept the rally alive. Monday’s start-of-November fireworks in the stock market was largely led by the energy sector, which brings me to the first chart.
Read my full analysis HERE