NEW YORK - The stock market surge since the start of the year that has sent the benchmark S&P 500 index up to new record highs is leaving behind one sector that typically outperforms in an expanding economy: energy.
Weak gasoline and petrochemical margins along with record U.S. crude production have weighed on refiners and integrated oil companies this year, yet fund managers and analysts say that energy stocks must also jump the high hurdle of negative investor sentiment before they can catch up to or even lead the broad market higher.
Oil prices are up by more than 35% since the start of the year, due in part to higher-than-expected global demand, production cuts from OPEC and the effect of U.S. sanctions on Venezuela. Economists expect the price of both Brent crude and U.S. light crude to stay above $60 for the rest of this year, according to the latest Reuters poll.
Noah Barrett, an analyst who works on several funds at Janus Henderson Investors, said the outsized gap between the gain in oil prices and the muted performance of energy stocks may help fuel a “catch-up trade” later this year. Yet for that to happen, companies must prove to investors that they can keep a lid on spending, he said.
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