© Reuters. JPMorgan’s Kolanovic issues a tactical trade to sell energy stocks
By Senad Karaahmetovic
JPMorgan strategists are telling the firm’s clients to sell energy stocks in the near term. The strategists, who have been Overweight Energy for months, are now seeing a tactical trade opportunity in energy stocks given “an enormous gap” between this group of stocks and the price of energy commodities.
“With being close to flat for the year, and the energy segment up ~60% (large cap and services, 40% small caps), we believe that there is a tactical trade to sell energy stocks (either outright or relative to Oil). The catalyst for convergence would be a pullback in the broad equity market,” they wrote to clients in a note.
The strategists highlight the short-term nature of their call as they remain firm believers in the “energy supercycle and broad market recovery after a Fed pivot.”
Along these lines, they added that a “significant pullback (20-30%)” in the energy sector would facilitate a great entry point for long-term investors.
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