Tech Fear & Oil Greed 🛢️⛈️ Is Energy a Safe Haven?
$CVX$CVE$AR$VIST // Energy Number Crunch When tech and AI take a beating, investors run for cover in Energy and Staples. We saw it again this week. On Friday, Oct 30, Intel fell almost 29% on a weak outlook, the chip index dropped more than 7%, and the Nasdaq lost 2.9% to finish down 5.3% for October. Alphabet and Amazon both spooked the market by burning cash on AI spending. The best sector on the day? Energy, lifted by strong results from Chevron and Exxon and by oil at six-month highs. That is why today's article is on four energy names: $CVX, $CVE, $AR and $VIST. The backdrop explains the bid. The US-Iran war is now about eight months old. Tanker attacks in the Strait of Hormuz and Houthi strikes on Saudi facilities pushed Brent to $117.64 on Friday, up 13.6% in October, with WTI at $104.12. Gulf OPEC producers are still pumping well under their quotas, and refining margins are fat because Ukraine keeps hitting Russian refineries. Energy-led inflation (September PCE at 3.6%, core at 3.1%) has the Fed thinking about hikes, not cuts. It held at 3.75% to 4.00% on Oct 28 with two dissents for a hike, and CME FedWatch puts the odds of a December hike at about 80%. Oil and gas still matter a lot to this economy. I suspect they will matter less in several years, but right now they are where the money is hiding. So do the midterms on Tuesday, Nov 3 clear the air? I asked Grok, and the answer was "partly." History is on my side. Since 1950 the S&P 500 has been higher 12 months after all 19 midterm elections, with an average gain of about 15%. Getting a known event out of the way usually helps. But the short term is messier: from Election Day to year-end the market rose in only 13 of 19 cycles, and 2018 (also year two of a Trump term) fell about 9%. This time there is also a specific post-election risk. Oil traders are bracing for the Iran war to escalate after the vote, because Trump has signaled he could resume airstrikes. Add a likely December hike and more tech earnings, and the relief rally could be short. My view: a better mood into year-end is reasonable, but don't count on it, and don't chase. That's my main point. Energy is the safe haven right now, but a crowded trade in names that have already run up is not a safe place to start. Your strike price drives your CAGR. Buy the fear, sell the greed, as Warren and Charlie would say. Today the fear is in tech, and the greed may be in oil. Here is what puzzles me. Many big tech names carry strong growth estimates for years. Microsoft's revenue estimates run about 15% to 18% a year for the next four years, and Nvidia's about 63% next year. Meanwhile, Chevron's EPS estimates fall about 10% next year and 17% the year after, and Cenovus's fall about 12% and 15%. Yet Seeking Alpha's Quant has CVX at 4.96 and CVE at 4.86, near Strong Buy. If the market is forward looking, why? Seeking Alpha's own FAQ answers it. Quant grades each stock against its own sector, weights momentum and EPS revisions heavily for "timeliness," and rewards cheap multiples and high profitability. A cheap, profitable oil major with rising estimates and a hot chart scores well even when the multi-year growth curve points down. Quant is a short-term timing tool, not a five-year forecast. It's useful for spotting momentum, but it's no substitute for a strike price. https://www.patreon.com/greengarage/posts/fear-in-tech-in-173934500
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