You can count on it, says our call of the day provided by Citigroup, though they say investors can’t expect as lofty returns.
“We see market rotation into energy equities as having further to run, even though names in our U.S. coverage already sit at all-time highs,” a team of analysts led by Alastair R Syme told clients in a fresh note. “History says energy equities usually perform well in an earnings recession, Citi’s base-case for 2023.”
Oil’s tumble also briefly knocked the year’s best performing energy sector, via the SPDR Energy Select Sector ETF XLE , to four-month lows before it recouped some losses. The ETF is still up a whopping 62% this year, beating all comers. “Without commodity price-inflation, growth and asset duration becomes a more important driver of relative equity performance, in our view,” said the analysts. Their three top picks in the energy sector are buy-rated BP BP BP — upgraded by Citi on Tuesday — Spain’s Repsol REP REPYY and ConocoPhillips COP .
Note, Citi’s economists do see the global economy continuing to lose steam with the U.S. tipping into recession by the third quarter of 2023 and Europe already there. The OECD also came out with its forecasts and not surprisingly, they were gloomy. Read: Bitcoin tumbles to fresh lows and Grayscale trust discount worsens as Genesis denies imminent bankruptcy