Investors are fleeing energy stocks like the economy’s been locked down
The last time investors were distancing themselves from energy stocks this much, we were also socially distancing from one another.
A measure of positioning developed by Deutsche Bank has slipped to its lowest level since 2020, ahead of the announcement of Pfizer’s progress on developing a vaccine.
That means investors have largely been missing out on a rare pocket of the market that’s done well stateside: the energy sector is the second-best performer in the S&P 500 year-to-date, with gains in excess of 5%. Texas Pacific Land, Hess, and Chevron are some of the standout winners.
Even as natural gas has been a bright spot, enthusiasm for energy stocks has dimmed due to both supply and demand factors. On the supply side, OPEC+ is soon adding crude to the market (somewhat unexpectedly, given a downdraft in prices that's seen West Texas Intermediate futures drop 6% year-to-date), while growth fears are escalating some concern about consumer and business demand for fuel.
Strategists led by Parag Thatte note that this low exposure to energy stocks is “approaching extremes.”
The bank uses net call volumes, short interest, fund flow data, sell-side price targets, and the correlation between mutual funds’ excess returns and sector performance to create this positioning indicator.
