10 things before the opening bell
Good morning, readers. We are closing out the week with some bullish views on one particular corner of the stock market, looking at why some top analysts on Wall Street say energy stocks have room to run even after a blistering rally.
Let's get into it.
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1. Energy stocks have soared — but there's still more upside ahead. That's according to Bank of America analysts, who said valuations are still attractive even after the sector has seen a 38% rally year-to-date.
The researchers describe energy as the "pain trade," which refers to a directional bet that most investors have taken that ends up going the other way. In this case, investors betting that the energy rally has run out of steam are wrong, and there are more gains coming.
There are a few reasons why Bank of America is still bullish on energy through the rest of 2022:
- The Ukraine war has made policy makers recognize the importance of domestic energy production and energy security.
- The allocation of energy in the S&P 500 has doubled since 2020, and could rise further.
- Cash yield will rise, and energy companies are expected to generate inflation-proof free cash flow yield of 15% this year.
And Bank of America isn't alone in its bullishness. JPMorgan said commodities could see another 40% upside as investors remain under-allocated in the space.
"It is conceivable to see longer-term commodity allocations eventually rising above 1% of total financial assets globally, surpassing the previous highs seen during 2008 or 2011," JPMorgan said.
In other news:
2. US futures are up today but stocks are heading for a weekly loss. War in Ukraine, a hawkish Fed and high oil prices are keeping investors nervous. Here's what's happening this morning.
3. On the docket: Icanic Brands Company, Sunlands Technology Group, and Rockwell Medical, all reporting.
4. A strategy chief shared why a recession that causes stocks to fall 25% from their highs could be on the way. Merion Capital Group's Richard Farr said a big hit to the market could come within three to four months. He shared four ways to bolster your portfolio ahead of the fallout.
5. Mexican billionaire Ricardo Salinas Pliego said bitcoin makes up 60% of his liquid portfolio. He spoke on a Thursday panel at the Bitcoin 2022 conference in Miami, and also added that bonds are "a terrible investment." See what else he got into it.
6. China is buying Russian energy in yuan in the latest drift away from the dollar. The move signifies the first commodities traded in yuan since Western sanctions hit Moscow. The first shipments of resources are set to arrive at Chinese refineries this month.
7. Legendary investor Jeremy Granthan is ringing the recession alarm. He said oil-price spikes of this caliber always slow growth sharply — and he also warned that a jump in food prices could destabilize economies and even political systems.
8. Goldman Sachs said disruptive innovation stocks look cheap for the first time in years. The recent sell-off has turned some high-growth tech stocks into bargains, according to the firm. Here are eight ways Goldman Sachs recommends investing in the controversial space.
9. A blockchain security expert broke down how to protect your crypto assets from hackers and scams. Ari Redbord of TRM Labs emphasized that users must remain vigilant every time they make an online transaction. Here's what you want to know.
10. Deutsche Bank slashed its Rite Aid price target and the stock cratered. The bank said COVID-19 "hastens the decline" of the company's retail pharmacy business. Rite Aid's stock dropped as much as 25% Thursday.
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Event invite: Join us on April 12 at 12 p.m. ET for 'Accelerate the Net-Zero Transition,' in partnership with Bank of America. Sustainable finance experts will discuss how the net-zero transition is being financed. Register here.
Curated by Phil Rosen in New York. (Feedback or tips? Email prosen@insider.com or tweet @philrosenn.)