Oil Prices: Tailwinds or Headwinds?
- Oil prices remain the dominant swing factor across sectors. The market continues to trade off geopolitical headlines, with conflict duration and price direction creating uneven sector tailwinds and headwinds. This has resulted in sharp leadership shifts that are disconnected from longer term fundamentals.
- Sector leadership continues to be inverted relative to 2025. Energy has been a clear outlier gaining roughly +40%, while technology (-7%) and financials (-10%) are the worst performers year-to-date (YTD). This dispersion reflects tactical positioning rather than structural strength, suggesting recent winners may struggle to sustain momentum if headlines fade.
- Defensives have notably failed to offer protection. Staples, utilities, and healthcare have not acted as effective refuges, largely due to stretched valuations. While some defensive sectors screen cheaper relative to peers, absolute multiples remain above historical norms, limiting downside protection.
- Financials continue to offer valuation support. Forward multiples sit below long-term averages, providing an attractive entry point despite recent underperformance. We remain constructive, viewing current weakness as sentiment driven rather than fundamental.
- Materials stand out on fundamentals. The sector combines attractive valuations with strong earnings expectations. Unlike Energy, recent gains are supported by improving fundamentals, increasing the likelihood of sustained leadership if global demand holds.
- Technology is re-entering the opportunity set. Valuations have reset meaningfully, with forward multiples now below long-term averages. At the same time, Technology shows the strongest upward earnings revisions, pointing to improving fundamentals amid cautious positioning.
- For the portfolio: We are making the following changes:
- Healthcare: Our position is still overweight. We are trimming our weight relative to last month.
- Energy: Our position is still neutral, but weight is slightly higher than last month to be in line with index weight.
Sectors in focus:
- Financials (BMO SPDR Financials Select Sector Index ETF – ZXLF)
- Materials (BMO SPDR Materials Select Sector Index ETF – ZXLB)
Please see Chart 3 below for the monthly tactical changes in the model BMO Sector ETF Portfolio.
Chart 1 – Sector Performance Chart
Chart 2 – Earnings and Valuation
| Earnings | Forward P/E | ||||
| Expected (Y/Y%) | Last Month | Change (%) | Next 12m | Z-Score | |
| S&P 500 | 16.28% | 3.18% | 13.10% | 20.41 | 0.63 |
| Tech | 39.92% | 7.78% | 32.14% | 21.86 | -0.09 |
| Communications | 12.02% | 11.27% | 0.75% | 20.44 | 0.79 |
| Financials | 6.31% | 5.56% | 0.76% | 14.78 | 0.15 |
| Utilities | 10.53% | 11.23% | -0.69% | 18.71 | 1.00 |
| Real Estate | 1.15% | 3.20% | -2.05% | 18.84 | -0.77 |
| Discretionary | 7.37% | 8.18% | -0.81% | 26.81 | 0.27 |
| Energy | 18.39% | -2.05% | 20.44% | 19.20 | -0.04 |
| Industrials | 6.29% | 7.45% | -1.16% | 25.75 | 1.18 |
| Healthcare | 5.14% | 4.88% | 0.26% | 17.77 | 0.24 |
| Staples | 4.89% | 1.59% | 3.30% | 22.08 | 1.39 |
| Materials | 27.91% | 23.88% | 4.03% | 19.43 | 0.20 |
*As of March 26th, 2026
Source: Bloomberg, BMO GAM. Z-Score is a measure of how much a data point varies from the average of the entire data set. A positive z-score says the data point is above average. A negative z-score says the data point is below average. The closer the Z-score is to zero, the closer the value is to the mean. Red = more bearish signal. Green = more bullish signal. For illustrative purposes only. Past performance is not indicative of future returns.
Chart 3 – BMO Sector ETF Portfolio for April 2026
| Index | Sector Portfolio | Difference | Weighting | Change from Last Month | |
| S&P 500 | 100.00% | 100.00% | |||
| Tech | 33.13% | 33.00% | -0.13% | Neutral | 0.0% |
| Financials | 12.52% | 13.00% | 0.48% | Neutral | 0.0% |
| Comms. | 10.15% | 10.00% | -0.15% | Neutral | 0.0% |
| Health care | 9.45% | 11.50% | 2.05% | Overweight | -1.0% |
| Disc. | 9.98% | 7.00% | -2.98% | Underweight | 0.0% |
| Industrials | 9.07% | 11.00% | 1.93% | Overweight | 0.0% |
| Energy | 4.01% | 3.50% | -0.51% | Neutral | 1.0% |
| Materials | 2.06% | 4.00% | 1.94% | Overweight | 0.0% |
| Utilities | 2.50% | 2.00% | -0.50% | Neutral | 0.0% |
| Real estate | 1.93% | 2.00% | 0.07% | Neutral | 0.0% |
| Staples | 5.20% | 3.00% | -2.20% | Underweight | 0.0% |
Source: BMO Global Asset Management. For illustrative purposes only. April 2026. Past performance is not indicative of future returns. The portfolio holdings are subject to change without notice.
Chart 4 – BMO Sector ETF Portfolio Weights Relative to S&P 500
Chart 5 – Sector Returns
| Returns (%) | |||||||
| Index | 50-day MAVG* | 100-day MAVG* | 5-day | Month-to-Date | Quarter-to-Date | Year-to-Date | |
| S&P 500 | 6477.16 | 6823.42 | 6827.90 | -0.45% | -5.84% | -5.38% | -5.38% |
| Tech | 5126.66 | 5458.89 | 5575.75 | -1.47% | -4.45% | -9.81% | -9.81% |
| Communications | 410.22 | 449.92 | 448.61 | -5.04% | -9.56% | -9.32% | -9.32% |
| Financials | 816.71 | 858.74 | 878.02 | 0.44% | -4.34% | -10.41% | -10.41% |
| Utilities | 460.95 | 458.54 | 449.54 | 2.31% | -4.55% | 6.26% | 6.26% |
| Real Estate | 256.64 | 268.00 | 262.64 | -0.18% | -7.80% | 0.63% | 0.63% |
| Discretionary | 1745.05 | 1863.38 | 1896.48 | 1.18% | -5.92% | -9.51% | -9.51% |
| Energy | 944.63 | 834.98 | 763.51 | 4.28% | 10.47% | 37.43% | 37.43% |
| Industrials | 1365.74 | 1435.20 | 1375.56 | 0.06% | -8.80% | 4.01% | 4.01% |
| Healthcare | 1700.83 | 1797.07 | 1798.80 | 0.71% | -8.77% | -5.82% | -5.82% |
| Staples | 913.03 | 953.67 | 912.35 | 0.46% | -8.98% | 5.57% | 5.57% |
| Materials | 616.21 | 639.18 | 604.36 | 4.52% | -8.80% | 7.28% | 7.28% |
Source: Bloomberg, BMO Global Asset Management, as of March 26th, 2026.
Chart 6 – Seasonality Chart (Avg Rank Over Past 35 Years)
Disclaimers
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