Energy: Leader or Laggard?-What You Need to Know!

Sectors, Energy, Uranium, Gold, Copper, Economic Cycle, Signals.

What sectors are leading the way.

“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected”.

George Soros

I have been on this “Energy could take over at any moment” for awhile. I know it has chopped around, it has lagged but in the end, energy has finally caught up. In third place YTD.

The energy sector can be a massive out performer at times but it also be a massive under performer like anything else. You have to trade it tactically.

Yes, cocoa is ridiculous but look below cocoa for clues. Japan is leading the way, silver is up almost 20% and oil is up around 19% YTD.

On a one month time frame, some of the laggards have caught up. Sugar, palladium and oil are leading the way. Something that you want to pay attention to is if the leaders keep leading. Oil continues to hold up.

If you think about this model based on interest rates (global) you can take the word recession out. Do we think that the Fed is ahead of the curve for once and that they know that if they lower rates it will not spark inflation? That is a wild, low probability bet.

Global liquidity is the main driver of risk assets, while cyclical growth expectations are the dominant force behind Gold's performance.

This puts us between two periods in the cycle. Heading in to rising rates because inflation is picking up quickly again. Or growth is slowing, the Fed and their metrics are pointing at inflation slowing as well leading to more talks of cutting rates.

These are the two scenarios that I keep pointing at. One is a crash in just about everything that is very short lived, leading to inflation skyrocketing after. The other is a scenario that I think is much more likely leading to stocks moving higher and inflationary sensitive assets moving higher afterwards.