"Energy Stocks Surge: Eco-Friendly Investors Struggle Between Conviction and Profit"

Traditional Energy Stocks Including Oil Companies Surge
Experts Say "Opportunities Are Visible, Can't Avoid Riding the Wave"

[Image source=AP Yonhap News]

[Asia Economy Reporter Kim Suhwan] Recently, as energy stocks have surged in the U.S. stock market, an analysis has emerged suggesting that environmentally conscious investors are being tested on whether to stick to their beliefs or chase profits.

The Wall Street Journal (WSJ) reported on the 24th (local time) that the Standard & Poor's (S&P) 500 Energy sector index has surged 54% this year, far outpacing the S&P 500 index's 21% rise during the same period, making it the top-performing sector index.

According to Dow Jones Market Data, the energy sector index widened its gap with the second-highest performing sector to 16 percentage points, marking the third-largest performance gap between the first and second sectors since 2000.

This contrasts with the past situation where, in seven out of the last eight years until last year, the energy sector's returns lagged behind the S&P 500 index returns.

Until now, investors who preferred environmentally friendly energy companies, which were generally perceived to have more attractive long-term prospects, recorded good returns.

However, WSJ pointed out that investors who had avoided traditional energy sectors missed out on the benefits of the energy sector's 19% rise in the past month. During this period, the S&P 500 index only rose about 3%.

Lee Baker, president of financial advisory firm Apex Financial Services, said, "It's a test of your beliefs," adding, "It's difficult not to ride the wave when you see an opportunity."

Baker had advised clients to buy energy stocks like ExxonMobil and Chevron when they plummeted during the COVID-19 crisis last year. He currently advises holding onto energy stocks as there is room for further gains.

WSJ reported that if direct investment in energy stocks is unappealing, there may be alternatives.

Citigroup analysts identified stocks that correlate with the energy sector but are somewhat more environmentally friendly, with European bank stocks being a prime example.

During economic expansion phases, energy prices tend to rise along with government bond yields, and when bond yields increase, banks' loan yields also improve.

WSJ noted that investors are paying close attention to the quarterly earnings reports Exxon and Chevron will release this week. Some analysts expect that if oil and gas prices remain high, energy companies will lead earnings growth in the stock market.

This content was produced with the assistance of AI translation services.