The S&P 500 is poised for a radical reconstruction over the coming years as energy stocks finally gain the attention they deserve from investors, investment strategist Louis Navellier said in a Friday note.
When oil prices slumped negative in 2020 amid the onset of the COVID-19 pandemic, oil stocks plummeted, extending a years-long downtrend that saw the energy sector decline to just 2% of the S&P 500. Today, that figure has tripled to 6% as energy stocks begin to outperform amid the ongoing Russia-Ukraine conflict, which has sent oil prices soaring.
Navellier expects the surge to continue, forecasting that the energy sector could represent 30% of the S&P 500 by 2025. That’d be a sharp rise for the sector that ESG-focused investors have shunned in recent years.
“Technology stocks remain very nervous, and a leadership change is underway,” Navellier said in reference to this week’s trainwreck of earnings results from mega-cap tech companies like Meta and Amazon.
“I predict that in early 2025, energy stocks will be 30% of the S&P 500 and technology stocks will fall to about only 32%,” Navellier said. The main driver behind Navellier’s thesis is that investment managers have to play catchup and buy energy stocks as most ditched them when the sector was just 2% of the index.
