One would think that the recent surge in oil prices would lead to a similar surge in energy stocks - the worst performing market sector YTD - or failing that, at least lead to a powerful capital flow realignment out of sectors that have underperformed recently (such as tech and semis) and into energy.
One would be wrong: according to Goldman's Prime Brokerage, last week hedge funds net sold Energy stocks for the first time in 3 weeks despite the price strength in oil markets.
But they didn't just sell energy stocks: they shorted them outright, a Pavlovian habit established in early 2023 when the preferred trade to hedge a coming recession was to short oil and energy, even as the rest of the market levitated higher on expectations of a soft (or no) landing. A visualization of the disconnect between oil and energy stocks is shown in the next chart from JPM.
