Energy Ringing the Cash Register in 2022

It was the best of times, it was the worst of times

Energy Ringing the Cash Register in 2022
Photo by Evergreens and Dandelions / Unsplash
Broader market woes notwithstanding, Energy stocks have ripped higher in 2022 with the average Energy stock +39%

The XOP is +34% and the OIH +36% YTD

We look at XOP vs the QQQ - it appears there could be significantly more mean reversion

It Was the Best of Times, It Was the Worst of Times

The broader market is off to its worst start in decades with no tangible signs of respite.  Inflation, post-Covid growth indigestion, rising rates, geopolitical concerns and valuation carnage have weighed on broader U.S. markets.

Meanwhile Energy has ripped higher

We took a look at the XOP (generally midcap E&Ps) versus the QQQ (technology bellweathers).  The data suggest the recent relative moves may be in the early innings.

Global oil & natural gas supplies are tight and shrinking in recent months.  The world is facing significant uncertainty related to Russia/Ukraine.  The Fed is trying to induce a slowdown or even recession to tame inflation.  The XOP-QQQ spread likely has room to run unless the Fed pushes the U.S. into a deep recession.