It shouldn’t come as a surprise to many that technology stocks happen to be the “most loved” sector (despite Friday’s massive selloff) with more Buy ratings than any other area of the market.
The technology sector also happens to be the best performing sector within the S&P 500 universe, a CNBC “Trading Nation” noted while citing data from Bespoke Investment Group.
Perhaps more surprising, energy is the second “most loved” sector within the S&P 500 universe. Should investors be equally exposed to energy stocks as they are to “FANG” stocks?
Oil Price Trap;
Low oil prices and a poor overall performance of energy stocks could lead some to believe that a mean-reversion trade could yield a profit, Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management told CNBC. While energy stocks could indeed rebound in the near term, investors need to consider the energy sector’s long-term “massive secular risks.”
“I think energy, in a lot of ways, is in a very disruptive phase right now,” he emphasized. “So from a long point of view, it’s actually a very negative business to be in.”
Other risks to investing in energy companies include the ongoing “disruptions” from traditional forms of energy towards cleaner and “green” sources, Schlossberg added.
Ari Wald, a technical analyst expert with Oppenheimer, added to the conversation and noted that the charts indicate energy stocks are stuck in a “secular, non-bull market.”
Even if technology stocks are overbought, the trend of outperformance is one that will continue “for a while,” Wald concluded.