![]() ![]() no, you are not trying to scare up with this kind of story. No we will not stop using oil and gas outright all way to zero. The demand for oil and gas has to come down every year in and out for next 50 years ! I think we will lop one to two million barrels of oil and equivalent amount in natural gas every year and replace with renewable energy. Europe is now moving MUCH FASTER ON renewables after stopping buying Russian oil PERMANENTLY! If you think that Europe will turn around and buy oil or gas from us in America or OPEC, then you are woefully mistaken. There is no futurer in it! Despite dragging our behinds with renewables, the renewable momentum is unmistakable. ![]() Multiply that AUM across numerous similar funds, and investors can begin to see how "forced buying" and selling could impact prices. BlackRock's Momentum ETF ( MTUM) alone manages $10b. The fund rebalances twice a year, and according to Bloomberg, the rebalance will begin next week. But for BlackRock's momentum ETF ( MTUM), now is the time to buy energy and sell tech. A variety of factors have lifted oil ( USO), gas ( UNG) and refining profits, resulting in energy equities ( XLE) rising 47% year-to-date, while technology companies ( QQQ) have fallen 27%. In recent quarters, economic fundamentals have shifted. ![]() With companies like Exxon ( XOM) trading at 9-10x earnings, the result is that Apple ( AAPL) holds a higher weighting in the S&P 500 than all energy companies combined. Ten years ago, Apple ( AAPL) traded at 12x earnings, today and with much higher earnings, Apple ( AAPL) trades at 25x. Companies growing earnings were rewarded with higher valuation multiples, while companies with cyclical returns saw valuation multiples compress. While the economic fundamentals warranted underperformance, Wall Street's pattern of "buying winners" and "selling losers" exacerbated the economic fundamentals. Regardless of the long-term effectiveness of the strategy, a rebalancing could have very real short-term effects.Įnergy stocks ( XLE) have underperformed technology stocks ( QQQ) for nearly a decade. Or perhaps a select few very large tech stocks outperformed for unrelated reasons over the past decade, driving strong returns for "momentum" investors. This ETF, representative of several active and quantitative strategies across Wall Street, claims to provide "exposure to large-and mid-cap US stocks exhibiting relatively higher price momentum." Said another way, the ETF buys stocks that have recently rallied, and sells stocks that have recently underperformed.Īs counter-intuitive as the practice may sound, Fidelity summed up Wall Street's view in 2016 writing, "due to common investor behaviors, momentum investing has led to outperformance over time." Perhaps Fidelity and BlackRock are right in their assessments, and chasing winners while selling losers is a profitable strategy. BlackRock's ( BLK) iShares MSCI USA Momentum Factor ETF ( MTUM) is preparing for its semi-annual rebalance next week. ![]()
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