Energy Select Sector SPDR Fund

Even after the Iran crisis resolves, crude oil prices will settle at a structurally higher floor than pre-crisis levels, boosting energy producer earnings durably rather than temporarily.

After peaking near 30% in 1980 and equaling tech at ~9% in 1996, energy has fallen to ~4% of the index — a 40-year structural re-rating that Carlson argues is permanent and irreversible.

Energy stocks peaking relative to the broader market has historically preceded the underlying commodity stabilizing or declining — Wilson sees this pattern playing out now.

Energy sector relative performance appears to have already peaked, which historically signals the underlying commodity has peaked or is stabilizing — removing one source of market anxiety.

Unlike the 2022 Ukraine crisis when oil production ramped up via rising rig counts, the Baker Hughes rig count has not moved higher this time — a supply constraint that could sustain energy stock outperformance.

NFJ is taking energy profits and adding to industrials and capital goods, arguing the market is recognizing that the AI trade requires hard assets and has overly discounted industrial machinery and similar sectors relative to software.

Energy stocks are up over 30% YTD while the Nasdaq is down nearly 9%, driven by soaring oil prices and investor appetite shifting away from AI-heavy tech. But energy's small index weighting (~3-4% of S&P 500) limits its ability to offset tech-driven index declines.

Energy stocks outperformed tech by 200%+ from COVID lows yet comprise only 3.7% of the S&P — career-risk pressure may now drive benchmark-hugging managers to chase energy and value at the expense of MAG7.