Energy stocks popped in Q3: Is it too late to get in?
The energy sector outperformed in the third quarter. Optimal Capital Director of Strategy Frances Newton Stacy tells Yahoo Finance Live that she is not convinced there is going to be a significant selloff in the sector due the supply and demand dynamics. However, Stacy advises that investors “wait for significant pull back” to buy the stocks, given their valuation and the Federal Reserve's stance on keeping rates higher for longer.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Video Transcript
AKIKO FUJITA: Well, there are only two trading days left in the third quarter. And while most stocks are stuck in the September slump, energy is a standout performer. So how can investors find success in the market? Joining us now is Frances Newton Stacy, Optimal Capital of strategy-- Capital Director of Strategy.
Frances, it's good to talk to you today. Let's keep this conversation going on oil. We have certainly had a number of guests who've come on, saying that they see real opportunity in energy. Given the pullback that we saw early on in the year, how are you positioned in the space right now?
FRANCES NEWTON STACY: For those that are overweight energy, they could probably take some money off of the table. I'm not convinced that this is going to sell off significantly. You could be buying some of these pullbacks. You're still paying quite a lot at this point, given the 30% rise in these prices. But the thing is that the fundamental story does remain quite strong, because, as you said, the Saudis and the Russians are cutting supply, and they are doing this intentionally to keep prices high.
So you've got the supply side part of the story, supporting these energy prices. And then, the demand hasn't yet wavered because the consumer, even though they're starting to show a lot of stress when it comes to inflection points and bankruptcies and foreclosures and delinquencies and credit, basically the consumer is still spending money and hanging in there, despite the higher rates. And so, you have both a strong story from the supply side and the demand side on oil prices continuing higher.
They will probably hit that threshold at some point. I don't know where it is, particularly. But I would wait for a significant pullback, if you're going to be getting into this meaningfully, because those prices are already quite elevated. In the face of the fact that we're going to continue to have higher-for-longer rates and tightening, and the mechanics of credit, at some point in time, will play out.
