Even though shares of energy stocks like Exxon Mobil (NYSE:XOM), ConocoPhillips (NYSE:COP) and Chevron (NYSE:CVX) have been steadily moving up for months, post QE2 they still look good, even if oil prices remain level.
A large number of energy stock are priced on $90 oil. So if prices remain at or around $108 a barrel, they are still a buy.
Even though an increase in interest rates is considered a negative for stocks in most situations, in the short term that shouldn't have any impact, as the federal funds are still at about zero. A major tightening would have to occur to change the scenario for stocks.
Expectations are it'll be a slow process for interest rates to be raised by central banks, so there's little chance of surprises there.
James Dailey, chief investment officer of TEAM Financial Managers, said, "The damage has been done. We have seen a pickup in the inflation cycle," said Dailey. "It is not just the Fed pressing the accelerator. It is the Bank of Japan and the European Central bank. I don't think there is going to be any draconian tightening anywhere."
"Even if we see tightening, that is no reason to not own commodities. Central banks will be behind the curve. You can get corrections based on it being overbought now but the fundamentals are intact. Unless there is a global recession or one or more central banks find religion and develop a Volckeresque appetite for monetary tightening, we see negative real yields."
As for energy stocks, they should continue to do well.
Thursday, April 7, 2011
Energy Trading (XOM) (COP) (CVX) After QE2
Labels:
Chevron,
Conocophillips,
ExxonMobil,
QE2
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