Look past the noise. History speaks louder: Insights from Denise Chisholm - March 5, 2026

Why oil shocks don’t always last

Rising oil prices amid renewed concerns about global energy supply have once again raised questions about inflation and central bank policy. While geopolitical events can drive sharp moves in oil markets, history shows those shocks are often temporary. Importantly, geopolitical crises do not always involve oil, and even when they do, price spikes have rarely translated into sustained inflation or long-term shifts in Federal Reserve policy.

Past episodes such as the Gulf War and Russia’s invasion of Ukraine highlight how quickly oil prices can move in both directions. When price increases are not durable, they are less likely to flow through to underlying inflation measures that central banks monitor closely when setting policy.

A very different energy backdrop than the 1970s

Today’s energy market also looks structurally different from the oil embargo era of the 1970s and 1980s. At that time, global oil supply was dominated by a small group of traditional exporting countries. Today, oil production from developed economies, led by the United States, has grown to a level similar to that of those exporters, largely due to the expansion of U.S. shale production.

In the historical data Denise tracks, the U.S. now stands out as a net exporter of energy, a sharp contrast to previous decades. At the same time, consumers spend a much smaller share of income on energy goods and services than they once did. Together, these shifts create a different framework for how oil shocks move through the economy, particularly in the U.S.

International equities and the challenge of cheap valuations

When attention turns to regional markets, international equities are often framed as attractive because of lower valuations. The challenge is that cheap valuations alone have not historically been enough. In Europe especially, lower prices have often reflected weaker earnings power rather than opportunity, creating a persistent risk of a value trap.

Earnings momentum continues to favour the U.S., while trends in Europe, and to a lesser extent Japan, remain flatter. Energy dynamics may further complicate the picture, increasing the likelihood that valuation alone may not provide meaningful support.

Why energy rallies aren’t always durable

Even with oil prices moving higher, the energy sector does not automatically move into long-term leadership. Historically, oil prices have often fallen in the 12 months following energy crises and energy stocks have tended to underperform over that same period.

This pattern creates what can be described as asymmetrical odds, where sharp outperformance often coincides with shocks rather than sustained fundamentals. While short term moves can occur, history suggests that chasing energy rallies has not consistently paid off over longer horizons.

Technology sell offs and the importance of starting points

Technology has also been under pressure, but recent sell offs have reset valuations to relatively low levels in historical terms, with starting points around the 38th percentile. From that perspective, it becomes harder to frame the sector as a bubble.

History suggests that similar valuation resets have improved the sector’s risk reward profile over the following 12 months, even in periods when fundamentals soften. Probabilities are not guarantees, but starting points matter, particularly when much of the concern is already reflected in prices.

A rare software disconnect and the cycle of renewal

Within technology, software stands out. Operating margins remain exceptionally high, while relative forward valuations are unusually low, a disconnect that has been rare across industries and time periods.

This dynamic fits within a broader pattern of creative destruction. Technology has reinvented itself repeatedly across cycles, with older models giving way to new ones. While some companies may not persist, others emerge and the sector has historically shown an ability to reset and adapt following periods of disruption.

Sector views: where strength and weakness are emerging

Denise’s top sectors:

1. Industrials: Supported by signs of a sustainable manufacturing recovery, with particular interest in machinery and transports from both a valuation and cycle perspective.
2. Financials: Valuations provide a degree of support that may limit downside and improve risk reward, even amid ongoing debate around private credit.
3. Consumer discretionary: Especially housing and homebuilders, which have worked through a rolling downturn, with much of the bad news already reflected in valuations.

Denise’s bottom sectors:

1. Consumer staples: Traditionally defensive, but less compelling in the current environment.
2. Utilities: Another defensive area that looks less attractive based on current dynamics.
3. Energy: Reflecting historical patterns following oil price spikes.

Conclusion: Where history still holds the edge