Why Energy Stocks Will Top Tech Giants

Energy stocks are looking attractive as investors rotate out of “crowded” growth trades, says one Wall Street strategist.

“The tech trade is still highly overvalued at this time” Lori Calvasina, RBC Capital Markets head of US equity strategy, told Yahoo Finance Live on Tuesday. “The leadership areas [stocks] are tired and need to take a break.”

“I agree that longer term that's [growth trade] where you want to be from a fundamental perspective, but we've just got to go through a correction there,” added Calvasina. “Money is going to rotate into these value-oriented sectors, and I think energy is giving you one of the best alternatives.”

Strategists expect the energy sector to outperform this quarter as oil is up around 29% since late June. On Tuesday, the S&P 500's Energy Select ETF (XLE) rose more than 2%, as technology stocks slid.

“We're starting to see energy do what tech was doing at the beginning of the year —exiting that downward revision cycle but it's still very early days,” she added.

The Information Technology XLK ETF (XLK) is up 40% year to date, still far ahead of XLE, up 6% since the start of the year.

Oppenheimer's chief investment strategist John Stoltzfus agrees oil's surge to 2023 highs brings a buying opportunity among equities.

“We find the S&P 500 energy sector looking increasingly attractive as policy makers in the US and abroad strive to contain inflation and manage economic growth,” Stoltzfus wrote.

Oppenheimer also sees energy benefitting amid a US push towards infrastructure projects and chip manufacturing.

On Tuesday, West Texas Intermediate (CL=F) hovered just below $89 per barrel in midday trading. Brent crude futures (BZ=F) sat above $91 per barrel.

Originally published on Yahoo.com