FLASH INTRADAY: Energy FOMO --> Food for thought

STRATEGY: Energy Sector (GICS 1) is now up 32% YTD
I am sending this intraday comment as I think it is becoming urgent for our clients to have some Energy exposure.  While the sector is puny (~2% S&P 500 weight), the rise in the sector YTD is now potentially creating performance issues, for those underweight Energy.

- YTD Energy is up 32%
- beating any other sector by a country mile

Source: tireless Ken of Fundstrat and Bloomberg


Energy is a misunderstood sector, and in the coming week,  I will write a complete narrative on why the sector has a central role in the coming economic recovery.  It is a lot more than just simply "people get on planes and drive on vacation"


Oilfield services (ETF OIH as a proxy) is ridiculously cheap vs oil price now
But there is also a comparative price gap between oil at $60 and where Energy equities trade.  Take a look at the comparative price of oil vs oilfield services stock (OIH ETF as a proxy), using data since 2009.

- at $60 oil, OIH should be $530
- it is about $200 now
- at $80 oil, which is possible, OIH should be $720

So you see, monster upside.

I recommend at least taking a small market-weight position, but obviously, since Energy is one of our Top 3 sectors for 2021, we recommend a much larger overweight.

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