Why Energy May Start To Follow Other Stocks & Why That Isn’t Good News

As the Fed and other central banks around the world have raised rates, some areas of the stock market have posted big losses. Tech, for example, and anything to do with the worlds of crypto and the blockchain were hit hard at the end of last year, and while there has been some kind of a bounce in the early part of this year, even that is looking suspect now after this week’s acceptance by Fed Chair Jerome Powell that “higher for longer” is now expected.

Energy, though, has moved in the opposite direction, gaining strength as other sectors suffered last year, then giving back some ground as other stocks recovered. That is not a coincidence. What was sold were things with intangible value, things like growth and the potential of speculative gains, and oil, as something tangible with a real-world use case, is just about the opposite of that. Still, if Jay Powell is to be believed in that he will inflict pain on the US and even the world’s economy if that is what it takes to get inflation under control, then that inverse correlation is about to break down. Oil is sensitive to overall economic conditions, and the economy has held up well so far, but if they deteriorate rapidly, the stock market will give early warning signs, and energy stocks won’t escape the negativity.

So, energy investors can no longer ignore the broader stock market and sit smug, making money as others lose. They have to start paying attention to stocks in general,…