It seems the greatest debate regarding the stock market at the moment is whether oil and energy stocks should be avoided, or bought in bulk.
Morgan Stanley released an article last week encouraging clients to buy. Hedge funds have already seized the opportunity. The 50 largest hedge funds in the US have been purchasing energy stocks in bulk (Energy Transfer Partners & Kinder Morgan) in the first quarter of 2015, according to their latest share disclosures.
Undeniably, it could be a smart move. Oil prices dropped below $45 a barrel in January. Around that time everyone couldn’t seem to sell their energy stocks fast enough. Now it’s trading at approximately $60 a barrel.
However there are still plenty of pessimists to investing. Goldman Sachs released their forecasts that oil will return to $45 a barrel next autumn. While cheap petrol prices make consumers happy and help boost individual economies (predominantly in the west) they don’t help with global energy profits as a whole. Investment expert Jeffrey Gundlach has stated that it ‘makes little sense in purchasing oil or energy stocks now”.
From Wall Street to the forex market, investors have to decide which direction oil prices are headed: up or down. That’s the difficult part! Many investors already have exposure to energy as they own mutual funds that invest in US shares from various industries. Therefore if energy rebounds, you will earn profit, however if it nosedives again, you are somewhat protected.