All posts in category: Energy Prices (14)

Few places to hide

Thursday, May 3rd, 2018

UK portfolios could be vulnerable to rising oil

We are concerned that oil may be entering a new trading range which could damage a conventional balanced portfolio. We look at two correlations: between equities and bonds and between oil futures and a balanced portfolio. In the Eurozone, investors don’t really need a hedge. In the US, it may be “nice to have”, but not essential. In the UK, equities and bonds are positively correlated at the highest level since 2001, which means that investors need some sort of hedge, even though we can’t yet be sure that oil is the right one.

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Time to Worry About Oil

Thursday, April 26th, 2018

Energy ETFs may be worth the risk

Crude oil may be breaking out of its trading since 2015, even if we allow for the weakness of the dollar. It’s time to ask how high it can go, and what this would do your portfolio. Beyond an overweight in the global energy sector and exposure to the right part of the US high yield market, it’s time to think about direct investment in the commodity itself.

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A Bit Weird

Wednesday, June 21st, 2017

The Curious Link between Energy and Tech

The fate of the US Energy and Technology sectors may be linked together thanks to the simple mechanics of portfolio construction. Our data suggest that investors may be herded into two large positions relative to the benchmark: a big overweight in Tech and a big underweight in Energy. It will be difficult to reduce one without reducing the other. So a bout of profit-taking in Tech may lead to a bounce in the Energy sector. More importantly, a bounce in the oil price could cause the Tech sector to underperform.

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Credit Quality Concerns

Wednesday, June 14th, 2017

Contagion threat to Investment Grade

While newspapers are fretting about the valuation of Technology stocks, our models suggest that there is a growing problem with US High Yield credit. This is not confined to the Energy sector and may soon impact US Investment Grade. Our previous note highlighted the importance of Investment Grade as an end of cycle indicator.

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