WHY Energy Stocks are struggling to keep up with the broader market
NordenBladet – Despite a robust performance in 2022, energy stocks have been lagging behind the rest of the market in recent weeks. While growth stocks continue to rise, the S&P 500’s Energy Select Sector (XLE) is up only 1%, compared to the benchmark index’s gain of more than 7%.
Last year saw oil and gas stocks soar while technology and consumer discretionary stocks declined, but 2023 has reversed that trend. Even though shares of companies like ExxonMobil (XOM) hit a 52-week high in early February, they have since been downgraded by CFRA Research given their recent run-up.
Exxon Mobil Corporation stock exchange statement for the last year. The screenshot has been taken 17. February 2023, 19:30
Source: Finance.Yahoo.com
“Our change in opinion is based on valuation. Shares are up 42% in the last 12 months,” analyst Stewart Glickman said in a note to investors, “In the near term, we think refining margins could narrow as price caps on Russian refined products work their way into the system in February, and we think oil services cost pressures may intensify.”
The performance of energy stocks is largely tied to the underlying commodity price, which has remained stagnant lately, but there is hope for the industry as oil prices are expected to rise in the coming months due to seasonal demand increases and China’s reopening post-COVID lockdowns.
For now, energy bulls are still favoring cyclical equities over high-tech growth names.
Featured image: Unsplash
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