FidelityConnects: Denise Chisholm: Sector watch – April 9, 2026

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Hello, and welcome to Fidelity Connects. I'm Pamela Ritchie.

 

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Oil prices are driving headlines for sure and the market reaction has

 

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been swift. History shows that markets often move well

 

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ahead of the noise and our next guest says that's because markets discount

 

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more than we realize and far earlier than most expect.

 

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How much economic damage do higher energy prices really do

 

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today, and what has the market already been pricing in?

 

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Joining us here today for a historical data-driven look at oil is Fidelity

 

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Director of Quantitative Market Strategy, Denise Chisholm.

 

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Denise, a warm welcome to you here today.

 

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How are you?

 

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Thank you. I am very well, although it's not warm at all where I am in Boston.

 

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Is it not? It's starting to actually perk up a bit here in Toronto so we'll

 

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take it. It's on its way.

 

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Oh, good for you guys. Now it's 40 but it feels like 32.

 

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I don't consider that warm for April.

 

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No, not yet. The flowers are coming, I'm sure, I'm  sure.

 

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Let's dig into this. We'll invite everyone to send questions to you.

 

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Tell us a little bit about ...

 

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we have a ceasefire that is hours old, I think we can still say that,

 

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in the Middle East and oil prices have reacted but

 

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there are still nerves in there as well.

 

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Directionally, should investors know what at this point?

 

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I think it's very tricky to ever look at negative headlines and

 

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think, okay, what do I do with these headlines?

 

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When you see bad headlines like there is impending war

 

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that seems like a sell signal, and when there is potentially good news, a

 

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ceasefire perhaps, that that is a good buy signal, and a

 

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tenuous ceasefire meaning that it's actually not gonna stick might be more

 

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negative. When you look at history, I mean, there's a real problem

 

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using negative headlines as a sell signal because what you know,

 

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and we say this over and over again, is that market's actually bottom on bad

 

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news. If you start to, as a long term investor, to sell

 

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on bad news the question then becomes what, in fact, do

 

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you buy on worse news and how is it that you know

 

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that it's bad enough?

 

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There's further complications in that the market can discount much more than

 

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you think, which is what you highlighted, further in advance than you'd think.

 

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I usually throw out this example, and if anybody wants the charts they can go

 

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to my LinkedIn, in the '70s and '80s the bottom

 

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in the market between 1976 and 1985 was not

 

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the deep recession of 1982, which was the second of two back-to-back

 

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recessions. It was before either recession started in 1978.

 

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Even though there was a recession in 1980, and you did have a

 

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reaction in the market, you had a peak-to trough contraction of about 15%, and

 

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there was another recession right behind it, so if you correctly predicted

 

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that, yet there was another drawdown about 25% from

 

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peak-to trough. The low in 1982 was higher than the low in 1980,

 

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which was higher than the low 1978, which means if you closed

 

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your eyes in 1978 and said all of these things are gonna come to fruition

 

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you could have woken up five years later and you would have made

 

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40% nominal returns and kept pace with inflation.

 

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But if you said all of these things are coming to fruition so I am going to go

 

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to cash you would not have.

 

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You would have been crushed by inflation.

 

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The interesting takeaway from history is that over and over again, even if

 

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you get the direction right of the economic outcome,

 

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you can get the stock reaction wrong.

 

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Bring that into today because we have been watching stocks, we've

 

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been watching, I mean, we haven't been able to watch what CEOs and companies

 

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are doing, we're sort of expecting to hear that in the earnings calls coming

 

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up, but the impact of higher oil prices for a short

 

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period of time, or maybe a medium period of time, we don't know exactly

 

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what it is yet.

 

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I guess just sort of take us through what that does mean for stocks,

 

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individually.

 

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Let's think about the driver, right?

 

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The transmission or mechanism to the global economy is oil prices.

 

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I think the knee-jerk reaction is to say, well, higher oil is bad because it's

 

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a tax on the US consumer. True statement.

 

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The question is, what kind of a tax, how high is the tax?

 

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We saw this movie last year with tariffs where if it's not big enough

 

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there can be more offsets than you think.

 

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Let's go through the math. The first thing that you should know is that the

 

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comparison to the 1980s might be more moot than you

 

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think. When you look quantitatively you can adjust oil prices for inflation

 

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and you can say, ooh, this is a problem.

 

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Real oil prices are getting higher.

 

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They were high in 2008 and they were high in 1980.

 

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You could draw a direct line to very strong economic pain.

 

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The problem is over time the economy has

 

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become more efficient with oil, right?

 

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Oil intensity is declining and declining quickly.

 

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The same price is hitting a very different economy, so much so

 

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that if you want to say, well, wait a minute, then we don't really care about

 

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prices, we care about impact, let's re-denominate oil prices,

 

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not inflation and oil-adjusted prices, but let's re-denominate

 

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corporate profits into that, what would the oil price have to

 

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be to have the same impact on corporate

 

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profits that it did in that peak in 1980?

 

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The answer is oil prices would need to be $1,000 a barrel.

 

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Even in 2009, the financial crisis,

 

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you saw a strain that was 3 1/2 times where we are right now,

 

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which is not to say that higher oil prices aren't

 

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a problem for the consumer but it might be that

 

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they are much more absorbable than you think.

 

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So for it to be as a ...

 

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if you turn it into a version of what the hit to corporate profits would

 

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be and measure it that way it would have to be $1,000 to really

 

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nail corporate profits in a way that they can't recover from, into a tailspin.

 

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To see the same strain, right, with the comparisons in terms of it could just

 

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be 1980 all over again.

 

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That is what you would need to see to have the exact strains from

 

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oil prices have a throughput to the US economy.

 

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Now, could you say, well, but wait a minute, we've seen recessions despite the

 

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fact that oil prices haven't had that $1,000 a barrel, yes, absolutely.

 

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We saw that in 2009. The strain produced in 2009 was

 

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about equivalent to $350 a barrel, which is all

 

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the math to say, well, wait a minute, how much of an impact or a throughput

 

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onto corporate profits is higher energy prices?

 

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What you see throughout time, it's less and less, which

 

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again, from an investment perspective you need to think about the offsets.

 

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We talked about the offsets with tariffs last year and what I think is the

 

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interesting math this time around, and again, we'll see, maybe oil prices do go

 

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to 200 or even higher, but what is interesting this time around

 

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is between 100 and $120 oil what you see is the flip

 

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of what we saw last year, meaning that tariff prices were creating higher

 

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goods prices which were attacks on consumers to the tune of, let's call it 250

 

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billion. That was more than offset by energy prices

 

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declining giving the consumer 250 billion.

 

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Now you're seeing that exact flip where you're seeing a tax hike,

 

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essentially, on US consumers to the tune of about 250 billion

 

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on an annualized basis, we'll see if it sticks, and the consumers are getting

 

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essentially a tax cut from the rebate cheques and the tax cut from last

 

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year that approximates about 150 billion, plus the decline

 

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in tariff rates that are declining from 13% to 7, which is

 

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another, let's call it 60 to 75 billion.

 

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Again, you have that is oil a strain?

 

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Absolutely. Nobody wants to spend more money on gas prices.

 

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Are we seeing an actual offset?

 

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Yes, we are seeing an offset.

 

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Could it be absorbed?

 

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Ye, and it might not be as bad as you think, which means that if you combine

 

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these two things it might not be as bad as you think, or it might take higher

 

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oil prices for much longer than you think and the market potentially

 

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discounted a bad outcome already, then the risk-reward

 

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is higher than you think and then the market can climb the wall of worry if

 

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we just get a positive second derivative in news flow.

 

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Which is it is better with a ceasefire and going directionally

 

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to looking at, say, June deliveries for oil are going to look better than

 

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something more near to today, essentially.

 

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It's going directionally in the right way.

 

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Right. I think that some of the narrative that I hear is, well,

 

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we've had a lot of shutting capacity in the Middle East so it's not just the

 

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Strait closures, it's going to take a long time for all that oil to come back,

 

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right now the ceasefire is tenuous, it doesn't look like it will hold.

 

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I think that what you want to think about as an investor is if you wait for the

 

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all clear signal you likely have missed the move.

 

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We saw this movie in COVID.

 

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We saw this movie in 2022 with inflation. I wouldn't say meaningfully better in

 

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2021 but that didn't impact the market bottom

 

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in 2020.

 

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Arguably, inflation in 2022, you could say that our economy is still struggling

 

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with. If you wait for inflation to be a

 

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good thing then you would have missed, I mean, what has it been,

 

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a 50% move in the market higher.

 

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I think that there is some cautionary note to what do you need to see?

 

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Do you need to see the Strait go back to normal and production

 

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go back normal? That won't happen anytime soon, probably,

 

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based on what the analysts are saying.

 

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But if you waited for that you missed the second derivative,

 

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which is to say that maybe June deliveries just need to be a little bit better

 

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than April deliveries, and maybe October deliveries, if

 

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they're better than June deliveries, that second derivative is the exact

 

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data that the market moves on historically.

 

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It's fascinating and it makes everything feel a little bit better considering

 

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what we're watching in markets right now.

 

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You were speaking about inflation there. Of course, that was the immediate

 

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discussion once we saw the beginning of the war in the Middle East,

 

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and at the end of February was, oh-oh, here comes all attempts to

 

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get inflation back in the box are now out of the box.

 

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How does that also get affected by oil prices?

 

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I mean, the issue is that they're transitory.

 

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We know that oil prices are not part of the core PCE or

 

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CPI, ultimately.

 

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That said, it's also filtering through.

 

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How do we think about inflation? Just kind of the same as we thought about it

 

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in December?

 

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I think about it a little differently than most analysts, and I think that

 

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that's the irony of it. We just walked through the math and why I don't think

 

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that this is the '70s and '80s.

 

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When it was the '70's and '80's oil was a much bigger impact to the

 

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US consumer and to corporate profits so there was an attempt to pass on that

 

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pricing power. I don't think that you have seen, or will see,

 

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corporate America try to pass on price increases through

 

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to the US consumer, most notably because we haven't seen that work in

 

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tariffs. What do you see statistically?

 

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When you see higher oil prices over

 

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time, from 1980 to now, which is I think the parallel that you

 

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would want to look at, what are the odds that up 10, up 20, up 30,

 

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up 50 over six months, up 50% over six month, these oil

 

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prices translate to higher or an acceleration

 

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in core inflation.

 

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If it lasts six months it's below 50/50

 

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that you see any translation, meaning that you wouldn't automatically say,

 

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yes, higher energy prices mean that there will be

 

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higher core inflation.

 

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You really only see 12 months you start to see it approximate about 60%.

 

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So if you said a 50% move in oil that lasts a year

 

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what are the odds that you'll see a filter through or an acceleration into core

 

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inflation it's 60%, which is lower than you might think, first of all.

 

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The takeaway is that I think you need to see something much higher

 

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right now and be much more sustained for

 

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a very long period of time to see that pass through.

 

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The way I think of it is not unlike the way we talked about tariffs, is

 

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that at the end of the day this is not an impetus for inflation.

 

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This is a tax hike on the consumer.

 

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Unless somebody gives them a whole lot more money to more than offset

 

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this you are not likely to see a generalized move in

 

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all prices. You will see energy prices go up and you might see

 

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other proxies with energy prices go up but if you don't give the

 

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US consumer any more money then they can't spend on any more goods or

 

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services. Their marginal propensity to consume goes down and everybody else's

 

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marginal propensity of price goes down with.

 

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It's back to this looks like over time, to me, more of

 

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a deflationary shock than an inflationary shock.

 

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Now, will you see a short term pop in the CPI, PCE deflator?

 

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Absolutely, you will.

 

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Will the Fed move on it, and that's the other interesting data point,

 

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not historically. Not historically.

 

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When you look at these moves up 10, up 20, up 30, up 40, up 50 sustained

 

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for six months what are the odds the Fed actually hikes

 

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rate, lower and lower and lower to the extent that

 

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oil is higher, which tells you that the Fed,

 

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historically speaking, has been more likely to look through an

 

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oil price shock than to react on it, which means that, I think, they

 

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kind of see what we've been talking about, which is more often than not, not to

 

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say every time, it's a tax hike on the consumer that is not

 

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a broad-based inflationary impact.

 

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That's absolutely fascinating. When you get to the story of regional

 

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investments around the world, you take a look at which countries have

 

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access to oil, therefore, ultimately, putting them in a better position

 

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in terms of energy security, which is discussed all the time now.

 

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What takes you back to the US safe haven?

 

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I know that is ultimately what you think and your data shows

 

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you. There are countries around the world that just don't have the same access

 

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to this energy security story, does this interrupt the international

 

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trade, basically, is the question.

 

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I think it does. I think that the international trade was potentially long in

 

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the tooth anyway, meaning that you had a revaluation reset but you've not had

 

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consistent outperformance because you really haven't seen the sustained

 

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inflection in relative earnings growth versus their US peers.

 

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So the whole, I think, narrative behind international was they're cheaper than

 

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the US and oh, by the way, they might grow faster because they have to invest

 

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in defence and other things.

 

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The problem that I have with that is twofold from a data perspective.

 

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One, that cheaper hasn't offered stronger odds, it's 30%,

 

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not zero but 30%, which means that that in and of itself has

 

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not been a table pounding buy for international.

 

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The second point so far has not played out according to

 

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the bull case, meaning that I'm still seeing your US peers grow

 

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stronger than EAFE

 

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or EM or Europe from a counterpart perspective.

 

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There's problems associated with that.

 

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Does higher oil prices make it more likely or less likely that

 

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they will outgrow their US peers?

 

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I think it makes it less likely.

 

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The US is now a net exporter so again, thinking back to the '70s

 

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and '80s, that was not the case in the '70s and '80s, and you're even

 

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seeing it in the WTI versus Brent spread, meaning the pricing for the

 

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US is reflecting the fact that it's

 

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more absorbable in the US from an energy security perspective.

 

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So yes, I think is yet another headwind in the international story.

 

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When we take a look at what was going on before this happened, there was a

 

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structural story in AI that is very much alive and directing

 

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markets, there was a hyperscaler story about whether they were

 

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slightly tapped out at all-time highs but there is discussion there, there were

 

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rotations going on within the market, do we

 

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return to that quite directly?

 

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Is there something that the oil price either accelerates

 

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on some level, I'm thinking in terms of supply chains, is there something that

 

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accelerates what we were investing in prior to this, ultimately, or do

 

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we go back to sort of the same thing?

 

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I think that there could be a different trade

 

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in terms of market breadth, which we've talked about for a very, very long

 

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time. We've talked about the nascent manufacturing recovery that I think hasn't

 

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changed relative to what we've seen over the last three years.

 

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Technology stocks, which have been the dominant leadership over the past three

 

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years, I'm not sure are negative in the sense that

 

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I don't think that there's a flip like you want to sell your technology stocks

 

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and buy all your industrial stocks and other stocks.

 

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I think technology still looks like leadership to me.

 

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I mean, we saw yesterday semiconductors breaking out on a relative basis

 

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back to all-time highs so there are some parts of technology that have

 

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basically looked through the shock of oil prices, which

 

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you usually see, historically speaking, to the extent that technology can

 

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grow it tends to be economy agnostic,

 

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meaning that economic shocks don't tend to hit technology

 

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companies to the same extent as other companies within the S&P, even

 

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including consumer staples.

 

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When I look at the data technology still looks remarkably

 

[00:18:08.620]

interesting in that we are now at the 33rd percentile of

 

[00:18:12.791]

relative valuation. We haven't been at these valuation levels in the last

 

[00:18:16.395]

decade. If you're worried about software and if you are worried

 

[00:18:20.632]

about other things in terms of, you know, maybe there's too much CapEx and

 

[00:18:23.602]

maybe you're gonna see declines in free cash flow, we'll see, we'll see with

 

[00:18:26.738]

all that, a lot of that is already reflected in the price.

 

[00:18:30.509]

To me, the risk-reward behind technology as a sector, and semiconductors,

 

[00:18:34.646]

specifically in hardware, much less so software, but still

 

[00:18:38.584]

look like a really strong positive risk-reward, still look like an

 

[00:18:42.054]

outperformer, and still look like they can lead the market higher.

 

[00:18:45.958]

What else falls into line there?

 

[00:18:47.826]

We've talked a little bit about sentiment, the consumer dealing with oil

 

[00:18:51.330]

prices. You've been interested in consumer discretionary over the course of the

 

[00:18:54.733]

last several months. Does that hold in your mind?

 

[00:19:00.939]

To me, yes. Housing has been the intriguing part of the consumer discretionary

 

[00:19:04.343]

story that we've talked about and it goes back to the what's priced in.

 

[00:19:07.679]

It hasn't worked certainly with the pop in mortgage rates, home builders have

 

[00:19:11.850]

actually struggled from a relative performance perspective.

 

[00:19:15.521]

I think that they're still offering a positive risk-reward.

 

[00:19:18.190]

Again, I'll kind of take the other side of this permanent inflation

 

[00:19:22.261]

is a problem and higher mortgage rates are a problem.

 

[00:19:24.997]

I think that we're still likely to go back to that lower trend

 

[00:19:29.234]

in terms of more disinflation and lower rates

 

[00:19:33.405]

over time, however slowly.

 

[00:19:35.941]

I think when you look at homebuilders and you think about the oil shock to the

 

[00:19:39.511]

US economy and the risk of recession, I want to gravitate

 

[00:19:43.482]

towards things that have already priced in what I think a recession is.

 

[00:19:48.053]

That's housing. I say that based on the data.

 

[00:19:51.723]

Relative price-to-book is in the bottom decile.

 

[00:19:54.259]

When relative price-to-book is the bottom decile in terms of valuation

 

[00:19:58.330]

the stocks, specifically housing stocks, have higher odds of outperforming even

 

[00:20:02.834]

if the worst news sort of comes to fruition.

 

[00:20:07.472]

A way to put a finer point on that is when you think about even the financial

 

[00:20:10.676]

crisis. Now, financials were the contagion area but

 

[00:20:14.713]

the other areas, and we can talk about what the contagion area is this time

 

[00:20:18.784]

but I don't think it's housing in the same way, but the other areas of the

 

[00:20:22.821]

market that were pro-cyclical bottomed well in advance of the actual

 

[00:20:27.025]

market bottom.

 

[00:20:28.594]

Technology and consumer discretionary on a relative basis started to

 

[00:20:32.731]

outperform in November of 2008.

 

[00:20:35.500]

Think about that. From October of 2008 into the bottom in

 

[00:20:39.504]

terms of March 2009 the S&P lost 30%.

 

[00:20:44.109]

Into that low you would have mitigated your losses or outperformed

 

[00:20:48.714]

that down draft by owning technology and consumers

 

[00:20:52.684]

discretionary stocks. That's the power of sort of discounting

 

[00:20:56.788]

it in advance, which means to say that some of the stocks had already

 

[00:21:01.093]

discounted a recession. I think some of that could be true with what

 

[00:21:05.130]

we're seeing in housing stocks.

 

[00:21:06.698]

Because in that situation in the March 2029 (sic) what was sort of

 

[00:21:10.702]

taking the market to the bottom was the financial industry.

 

[00:21:13.472]

It was the finance stocks but everything

 

[00:21:17.509]

else, as you mentioned, so in this case, if

 

[00:21:21.480]

there is contagion what is the sector to take us there while

 

[00:21:25.717]

others might still be fine?

 

[00:21:28.787]

It's tricky because we're not in exactly the same instance of a recession.

 

[00:21:33.225]

I sort of gave you the recession math when the market's already down 50%,

 

[00:21:37.729]

I think, to that point. That's a slightly different story.

 

[00:21:41.300]

We're at a 10% correction so I think you can see sort of these rolling

 

[00:21:44.770]

recessions as opposed to a contagion group.

 

[00:21:47.606]

I don't think we have a contagion group because we don't have a recession yet.

 

[00:21:53.879]

Going back to the Fed, the discussion of sort of growth within the economy,

 

[00:21:58.850]

what drives a Fed hike, you mentioned almost never

 

[00:22:02.921]

is it a massive spike in the oil price even if it's one

 

[00:22:07.059]

month or longer? It tends not to be that but it would

 

[00:22:10.996]

be growth, if you could see growth across various industries

 

[00:22:15.434]

and what also would you put in there?

 

[00:22:17.336]

Labour? I mean, just get into the discussion of hikes versus cuts which

 

[00:22:21.440]

has been a little bit all over the place over the course of the last month in

 

[00:22:23.975]

terms of bets on that.

 

[00:22:26.812]

It's tricky because also levels matter. We were talking about a

 

[00:22:30.782]

completely different story when the Fed was at 5.25, right.

 

[00:22:34.419]

At 3.75, or wherever we exactly are, I

 

[00:22:38.390]

probably have my numbers off a little. At 3.75 you're not massively restrictive

 

[00:22:42.361]

anymore. You're certainly not accommodative.

 

[00:22:44.629]

The question is how accommodative do you need to be if growth is

 

[00:22:49.234]

okay-ish at 2% and the labour market is potentially stabilizing.

 

[00:22:53.071]

You don't need to be massively restrictive.

 

[00:22:56.808]

The question is, would you have to hike if we saw an inflection?

 

[00:23:00.579]

Probably not in the beginning stages but if we were to see

 

[00:23:06.017]

1, 1 1/2% employment growth over the next year, and GDP on a real basis go from

 

[00:23:09.988]

2 to 4, then you might actually see the Fed have to hike rates.

 

[00:23:15.360]

If you think from an investment perspective that, ooh, that would be bad

 

[00:23:18.830]

because now you created a scenario which you lose either way, Denise, right?

 

[00:23:22.300]

If the economy recovers the Fed has to hike, that's bad for equities, or if the

 

[00:23:26.104]

economy doesn't recover the economy does recover so that's bad for our

 

[00:23:29.040]

equities. Don't do that math. Be very, very careful.

 

[00:23:32.010]

If the Fed is hiking because there is growth the equity market

 

[00:23:36.181]

has no problem with it historically.

 

[00:23:38.784]

You're always rooting for growth even if it comes with modest rate

 

[00:23:42.788]

hikes because rate hikes more often than not are a reflection

 

[00:23:47.025]

of growth, not a deterrent to it.

 

[00:23:50.595]

In terms of the cut story, a couple were priced in

 

[00:23:54.533]

for the end of this year.

 

[00:23:56.501]

There's lots of things going on there. Again, what do we return to once

 

[00:24:00.639]

the headlines, which is how we started this conversation, calm down a

 

[00:24:04.576]

little bit, if they do calm down a little bit.

 

[00:24:06.411]

What is the narrative that we're coming back to for the Fed to have to deal

 

[00:24:09.915]

with? How different is that?

 

[00:24:12.317]

I think you've outlined a lot of it but I'm just curious.

 

[00:24:14.319]

We come back to a bit of a political/actual monetary

 

[00:24:18.356]

policy story there, don't we?

 

[00:24:21.293]

Yeah, I think we have to wait for the disinflationary trend to

 

[00:24:25.263]

resume to get more cuts on an ongoing basis.

 

[00:24:29.835]

It's back to the do we need the cuts?

 

[00:24:31.703]

Well, we're not that restrictive so it's not clear to me that you need the

 

[00:24:34.606]

cuts. But what you're rooting for is a little bit more growth,

 

[00:24:39.311]

specifically out of the labour market, which I think forward-looking indicators

 

[00:24:42.013]

do suggest will happen by profits, at the same time

 

[00:24:45.984]

as the disinflationary trend continues, probably as a result

 

[00:24:50.088]

partially by productivity advances.

 

[00:24:52.858]

With that then we can grow into the rate scenario over

 

[00:24:56.795]

time. I think that that's likely what we get back to, which is,

 

[00:25:00.765]

again, back to my base case that I think higher energy prices

 

[00:25:04.769]

act like the same way tariffs did.

 

[00:25:06.938]

They act like a tax cut, probably don't stop the disinflationary trend,

 

[00:25:10.842]

probably mean over time that the Fed can cut if they need to, or

 

[00:25:15.080]

if they have the room to with the disinflationary trend, and if they

 

[00:25:19.217]

don't cut it's probably a reflection of growth, which is also good for the

 

[00:25:21.853]

market.

 

[00:25:22.654]

Which is also good for markets. Really interesting it comes back to this.

 

[00:25:25.490]

Just take us through the top three, you mentioned them earlier, and also what's

 

[00:25:29.094]

at the bottom, no go for now in terms of sectors

 

[00:25:33.798]

Technology at the top, industrials right after it.

 

[00:25:37.769]

I'm still financials or consumer discretionary is tied for that next

 

[00:25:41.773]

level. The interesting part, I think I just saw the other day and we'll see how

 

[00:25:45.110]

it comes out because certainly I don't think that the war is over, but from

 

[00:25:49.247]

the start of the war technology has actually been one

 

[00:25:53.251]

of the best performing sectors along with financials.

 

[00:25:56.254]

It's back to that, ooh, be careful sort of from a discounting perspective.

 

[00:25:59.257]

One of the reasons why I gravitate towards financials is

 

[00:26:03.461]

because they're in the bottom quartile of their relative valuation.

 

[00:26:06.598]

Whatever it is that you're worried about might already be priced in, right?

 

[00:26:09.801]

That's sort of where you see that stuff actually bubble up

 

[00:26:13.872]

to how you can actually make money.

 

[00:26:16.308]

Technology, industrials, financials or consumer discretionary.

 

[00:26:20.979]

On the flip side I would say anything defensive, right, consumer

 

[00:26:24.883]

staples, and I would put utilities.

 

[00:26:26.952]

Utilities has been the best performing defensive sector and depends sort

 

[00:26:30.922]

of on your time horizon it's been back and forth and back and forth.

 

[00:26:34.626]

I think after the pop you sell it more than buy it so those two sectors

 

[00:26:38.730]

are in the crosshairs for me.

 

[00:26:40.765]

I'm actually writing my note for tomorrow, which I think will get posted on

 

[00:26:44.436]

LinkedIn a week later [crosstalk].

 

[00:26:48.073]

On energy, why I wouldn't chase the stock specifically.

 

[00:26:51.910]

We've talked a lot about why I wouldn't chase higher oil prices because high

 

[00:26:55.780]

prices tend to cure high prices.

 

[00:26:57.949]

When you look statistically supply shocks usually don't last, which is,

 

[00:27:01.953]

look, if you have different information and you know more than Denise Chisholm

 

[00:27:04.990]

on the scenario in the Middle East and think it's gonna be higher for longer,

 

[00:27:08.860]

that's all you. I don't have confidence in that outcome.

 

[00:27:12.030]

When I look at the historical data high prices tends to cure higher prices so I

 

[00:27:16.167]

tend to not want to rush in.

 

[00:27:17.936]

You're seeing the same thing for energy stocks on my data.

 

[00:27:22.240]

They popped for the first time into they're above 20 times earnings,

 

[00:27:26.311]

which is in the top quartile of absolute valuation, the top quartile of

 

[00:27:29.814]

relative valuation, and I get the scenario where, Denise, yeah, but

 

[00:27:33.852]

oil prices, higher oil prices mean that earnings are gonna be better too so

 

[00:27:37.589]

you're gonna look back and say, well, higher energy prices bled through into

 

[00:27:41.092]

higher earnings and the stocks weren't as expensive as you thought.

 

[00:27:43.428]

But when you just take that at face value, when you look over time, that

 

[00:27:47.265]

diminishes your odds of outperformance even with higher oil prices.

 

[00:27:51.136]

It's back to the flip of what we just talked about with housing and financials.

 

[00:27:55.140]

Some of what you are thinking might be to come in energy

 

[00:27:59.077]

prices might already be priced in to the stocks as well.

 

[00:28:02.914]

It's all about what's being priced in already.

 

[00:28:05.316]

We are so grateful for your insight because it takes us to a very different

 

[00:28:09.287]

foundation for everyone to invest.

 

[00:28:11.690]

Thanks for your time, Denise Chisholm.

 

[00:28:13.458]

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