Investors should take advantage of the divergence in the performance of oil stocks and crude oil so far this year to sell energy stocks in the near term, says Marko Kolanovic, chief global market strategist at JPMorgan.
Kolanovic, who is still bullish on the energy sector longer-term, believes stock prices could start falling soon, he told clients in a recommendation note Thursday, quoted by Bloomberg.
Investors now have an opportunity to sell short-term because “a huge gap has opened up between energy stocks and the price of energy commodities,” Kolanovic said.
JPMorgan’s chief strategist sees stock prices falling by more than 20% in the near term.
“This is a tactical short-term decision and given that longer term we still believe in the energy super cycle and a broad market recovery after a Fed pivot, a significant drop (20-30%) in energy stocks would be a great entry point,” Kolanovic wrote in the communication to customers.
According to S&P data compiled by Yardeni Research, the energy sector in the S&P 500 index is up 52.4% year-to-date through December 8th. It’s the only major sector in the S&P 500 to have posted gains so far this year. Within the Energy sector, the Integrated Oil & Gas sub-sector is up 63.2% year-to-date, Oil & Gas Equipment & Services is up 49.9%, Oil & Gas Exploration & Production is up 45.2% and Oil & Gas Refining & Marketing are up jumped 55.5% so far this year.
Crude oil prices, however, just erased all gains from 2022 as Brent Crude plunged below $80 a barrel on Tuesday, its lowest level in a year. Prior to this week, Brent had last settled below $80 a barrel in early January, more than a month before Russia’s invasion of Ukraine that rattled global energy markets and sent crude prices above $100 a barrel in the spring.
By Charles Kennedy for Oilprice.com
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