Energy has dramatically outperformed the YTD, running at over 4x the index…

… and returning 126% since 2024 versus the total market at 85%, second only to materials (mining) at 162%.

While the geopolitical backdrop remains supportive of excess cash generation from the energy sector for now…

… any form of conflict resolution would likely reverse some of that outperformance, underscoring the significant volatility that’s characteristic of the sector.

Telecom has historically been on the other end of the volatility spectrum, though the sector has massively underperformed the broader market in recent years…

… due to a confluence of structural challenges, including rising rates (hits the debt load and cash flow duration) and sluggish population growth…

… which has driven steady pricing pressure alongside intense competition between the major carriers…

… though an immigration restart would likely moderate that headwind to some degree. With the group trading at trough multiples…

… any form of conflict resolution could create the conditions for an interesting rotation trade, given it would send inflation and rates in the opposite direction (all else equal).

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