Crude oil price keeps going up. It’s up 8% for the year and as you can see in the table below, the Energy sector is the best performer YTD, more than doubling the next best performer, the Financial sector. OPEC implemented some production cuts in late 2022 that will gradually be reduced starting in April this year, but will only phase out (unless things change) in 2026. Two takeaways: (1) inflationary pressures on headline CPI will start mounting, as energy costs keep rising. If oil remains stable aground $80/barrel, this can be manageable, but if it starts going up to $90, the impact on CPI will be noticed. (2) if you’re looking for a hedge against inflation at reasonable valuations (P/E around 23) perhaps the energy sector can offer those benefits. As the year progresses, we will see what sector takes the lead out of Tech and out of the Mag7 stocks.
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Source: Fund@mental
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