A Comment -- General Comments From an Expert (A Commentary)

Crude oil has topped $81/barrel and high prices are here stay. The U.S. should look at what's happening to the shortages in Europe as a warning. Fracnce relies on nuclear energy, but the rest of Europe doesn't produce enough natural gas and oil, and wind energy is intermittent. Europe has far more structural issues than the U.S. which has a lot of nat gas and oil. This year, the S&P hit a peak PE of 23x, and has trickled down to 20x, driven by better earnings. Earnings this quarter will be exciting. Lean into tech as growth slows. Debt to GDP is rising, too, and GDO will be slowing. Stay in secular growth companies, long-term. You can rent smallcaps for now. Energy and materials offer long-term secular growth after doing nothing for the last 10 years.

Oil stocks Crude oil will rise, but oil stocks won't necessarily rise too. It's a dislocation. But we could see more individuals buying oil stocks, which would narrow this gap. The ESG penalty box is real for oil stocks, apart from speculators and hedgers, but she thinks this will change.

The megacap tech names will eventually resume their rally. The S&P in the past 5 days is up 2.6% because MSFT, Apple and Amazon are all outperforming the S&P. Forget this binary outcome for the index, which he feels will go where megacap tech will do. Coming up is the most compelling earnings season since Oct. 2018 when industrials like Caterpillar were fearing tariffs. Now is the same situation but from rising input costs including wages that'll effect company guidance. The current reopening is about stagflation (last year's was about reflation). Smallcaps are still below their March highs. Airbnb, Disney and Uber--reopening stocks--are not ripping to new highs; it's different from 2020's reopening. Input costs and wages are spiking.

He disagrees that this is a large-cap tech rally. Energy, financials, materials and industrials have been leading in the last 3 weeks, instead. In the first quarter this year, the FAAANGs stagnated or dipped, like Amazon and Apple, while the market rallied overall. Delta is the most important factor in the market, but Delta has clearly peaked in the U.S. and globally. This means people are coming out again--flights are way up as well as hotel room rates in Vegas, up double-digits vs. 2019. Also, people are returning to work. There's still a lot of unclogging in the supply chain to come, but it is gradually improving, based on ships anchored off Los Angeles.