Energy-shunning investors may end up feeling pressure from higher oil prices.
“It didn’t hurt not to own energy” when the sector was less than 2% of the S&P 500 SPX,
Savita Subramanian, a stock and quantitative strategy analyst at BofA Global Research, said Thursday. But the sharp rise in oil prices in the context of the economic recovery could change that.
“Another big jump in oil prices may be felt more acutely,” Subramanian said, estimating that “an astronomical 92% yield since October has raised the energy share to 3%” of the S&P 500.
“If energy doubles again, and all other sectors have average returns, investors not exposed to energy risk will sacrifice the full” 3 percentage points of market returns, she calculated, adding that this would more than negate the relative returns for active managers this year. …
Meanwhile, portfolio managers who only bet long positions are twice as familiar with tech giant Facebook Inc. FB,
than the entire energy sector, the report says. Energy accounts for roughly 2% of the weight of the average portfolio manager with only long positions, half the 4.2% exposure on Facebook.
To read: Oil rallied and US prices surpassed $ 70 a barrel again
Oil prices CL00,
rose on Thursday, while US and world indices are trading above $ 70 a barrel. This is a significant rebound after U.S. oil fell below $ 20 in the first half of 2020, when the COVID-19 crisis was wreaking havoc.
US oil and gas stocks jumped: S&P 500 Energy SP500.10 Index,
according to FactSet, growth of about 45% this year as a result of economic recovery from the pandemic-related halts. Last year, the index fell by about 37%.
IShares Global Energy ETF IXC from BlackRock,
the exchange-traded fund, which tracks the index of global energy companies, rose 0.2% in trading on Thursday afternoon. The increase in the annual yield of the offer is about 34%.
The US stock market is trading near record highs, but gains are still well behind the energy sector.
S&P 500 Index and Dow Jones DJIA Industrial Average,
after trading on Thursday afternoon, each benchmark rose nearly 13%, while the high-tech Nasdaq Composite COMP,
grew by almost 9% in 2021.