JPMorgan strategists are advising clients to sell energy company stocks soon. Strategists who have kept energy stocks rated “above the market average” for months now see a tactical opportunity, given the huge gap between this group of stocks and energy prices.

Why are energy company stocks down? 

“Given that crude oil prices are almost flat for the year and the energy segment is up about 60% (large-cap and service companies and 40% small-cap companies), we believe there is a tactic to sell energy company stocks (either directly or relative to oil assets). The catalyst for convergence will be a pullback in the broader stock market,” they wrote to clients in a note.

The strategists stressed the short-term nature of such a call, as they remain a firm believer in an energy supercycle and a broad market recovery after the Fed’s reversal.

As such, they added that a significant pullback (20-30%) in the energy sector would provide an excellent entry point for long-term investors. 

We previously reported that Chinese consumers had accumulated a significant amount of cash during the pandemic.