Funds are pouring into US energy stocks crazily! JF Mackay and Citigroup issue warning together: the rally may have peaked.

Wall Street institutions, including JP Morgan and Citigroup, believe that investors who have sought refuge in energy stocks amidst the backdrop of the Middle East conflict should not be too relaxed, as the soaring energy stocks may have already reached their peak. Even before the surge in oil prices triggered by the Middle East conflict, the energy sector was already the best-performing among the 11 sub-sectors of the S&P 500 index. With the rise in oil prices, the energy sector has further expanded its leading performance in the market. Data shows that so far this year, US oil and gas stocks have risen by 29%, far outpacing the broader market, even after a broad rally on Monday driven by optimism that the critical oil passage in the Strait of Hormuz may reopen. In the two weeks since the outbreak of the Middle East conflict, traders have been investing in energy stocks despite White House attempts to alleviate concerns by promising that the spike in oil prices will not continue. Ben Cook, portfolio manager at Hennessy Advisors, said, "Have these stocks already factored in oil prices higher than current forecasts? It's very likely." He pointed out that Wall Street has been trying to balance the risk of oil prices staying high in the long term and the Trump administration's efforts to suppress oil prices through rhetoric against more important supply-demand fundamentals. JP Morgan analysts stated that a large amount of funds from active and passive funds in the US have been flowing into the energy sector, with the rolling total of the past 12 weeks increasing by 7% of the managed assets, "exceeding all periods in the past 15 years except for the most extreme cases". Andrew Greenbaum, Senior Vice President of Stock Research Products Management at JP Morgan, said in a report, "This is close to the top area." Greenbaum pointed out that at the index level, the weight of energy stocks in the S&P 500 index has jumped by over a third in just 55 trading days, from about 2.7% to 3.7% of the index. These fluctuations suggest that "most of the position adjustments may have been completed". He is not the only one skeptical about whether the huge surge in the energy sector this year can continue. Citi's global sector selection model on Monday turned the US energy sector to a short position and predicted that the sector would decline in the next month, while the technology, industrial, and financial sectors may perform better. In addition, analysts at investment bank Raymond James also pointed out in a client report on Monday that considering the early-year gains of energy stocks, investors have begun to ask "whether the market has partially priced in the impact of the Middle East conflict."