I Like This Secular Bull Market

JC Parets
May 12, 2022

Technically, not everything can underperform.

There are always some groups of stocks that are doing better than the others. Whether that means going up in price faster, or going down in price slower.

In some cases, like more recently, some stocks do well on an absolute basis well others lose value altogether.

This year we've seen the largest dispersion of returns among US Sectors in over 20 years. The difference in returns between Energy and some of the Growth areas like Communications or Tech have been historic across the board.

Here's Energy relative to Technology, as well as Energy relative to the overall market, as defined by the S&P500:

After over a decade of underperformance, is this bearish to bullish reversal in Energy stocks relative to the rest of the market just getting going?

Or has it run its course?

We haven't seen evidence yet that it's over. Quite the opposite, in fact. Energy commodities and Energy Stocks continue to hold up the best.

As a Sector, not only was Energy the best performer in 2021, it was also the best performer in Q1 this year. And so far it's the best performing sector in Q2, and also the best performer so far for May.

This could change. Anything could happen. But this is one thing that still has not changed.

And while we could see some reversion here, considering the record dispersion, I think we need to err on the fact that from a secular perspective, this trend has legs.

Let us know what you think!

JC

 

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