Energy Vs. Tech Sectors: Epic Set Of ‘Alligator Jaws’ Developing
Jesse Felder | May 20, 2021 01:11AM ET
One of the major themes I’ve been operating under for the past several years posits that, due to passive investing’s increasing popularity, popular sectors like tech and an underweight of unpopular sectors like the traditional energy sector.
In this way, ESG has merely served to magnify the more attractive than they otherwise would have.
Since last fall, however, momentum has shifted and energy has begun to outperform tech and the rest of the stock market. As a result, many may be asking themselves whether this trend is sustainable. But when you look at the historical weighting within the S&P 500 Index, energy still comprises a smaller portion than it did 20 years ago, at the dawn of its last major bull market, and tech and communications services are just below their all-time highs set back then at the peak of the DotCom Mania .
So I would just ask in return, looking at the chart above, does it appear that energy has become overextended? Or is it more likely popular sectors like tech still have some give back ahead of them?
For my money, those alligator jaws look more likely to snap shut than to open even wider, especially if record equity flows were to put in some sort of a reverse course .
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