Investors have been pulling money out of top performing energy positions this year and putting it into the technology sector, but some analysts say they may be moving out of oil and gas companies too soon. An ETF that mirrors the S & P technology sector has fallen 33% this year, while the ETF representing the energy sector is up 45%. So, Strategas analysts find it curious that the Technology Select Sector SPDR Fund (XLK) has seen inflows of $244 million this year, while the outperforming Energy Select Sector SPDR Fund (XLE) has seen $584 million in outflows. “Even over the last year, $2 billion went into XLK and $700 million went out of XLE,” said Todd Sohn, Strategas technical strategist. Energy is the only major S & P industry sector that is higher for the year. On top of that, Strategas found that the energy sector is punching above its weight when it comes to earnings power. For instance, its 12-month trailing earnings weight among S & P 500 companies is more than double its S & P 500 market cap weight of about 5%. Sohn said the sector, therefore, could see valuations rise to the point of where they are closer to 10% of the S & P 500 market capitalization. In the past 50 years, the sector has traditionally been about 11% of the S & P 500, he said. S & P energy earnings are expected to soar 121% in the third quarter, while total S & P 500 earnings are expected to grow just 4.1%, according to Refinitiv. Technology companies are expected to see an earnings decline of 3.5%. Based on the energy sector’s charts and fund flows alone, Sohn says energy still looks like a buy, including the biggest market cap companies, such as Exxon Mobil , Chevron and ConocoPhillips. Investors also need to consider that the price of crude oil could be a wild card for the sector, and it is driven by macroeconomic and geopolitical forces. Oil is off its highs of the year, but it could rise if supplies become constrained. It could also fall if there is a recession and demand drops. West Texas Intermediate crude futures rose to about $130 per barrel when Russia invaded the Ukraine earlier this year but since then fell back to the mid $70s. On Wednesday, WTI futures were at about $87 per barrel. From a chart basis, Fairlead Strategies founder Katie Stockton said West Texas Intermediate oil looks set for a push higher before returning to the recent lows. In a note Tuesday, she wrote: “We believe the rally will resume after a shallow pullback, based on improvement in our…
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