The price of crude oil is up more than 60% this year.
And a majority of the 266 investors surveyed by Bank of America Global Research think "black gold" is going to remain the year's biggest winner.
In its latest Fund Manager Survey, BofA found that 67% of respondents believe oil will produce the best returns this year. That's up from 56% of investors who thought the same last month.
Michael Hartnett, global strategist at BofA who leads the survey, writes that this leaves "no doubt" about what the pain trade will be in the second half of this year — and that is lower oil prices.
The price of oil rose throughout 2021 amid an economic rebound, and Russia's invasion of Ukraine in February of this year placed further strain on global energy markets.
At the start of 2022, a barrel of West Texas Intermediate (WTI) crude oil, the U.S. benchmark price, cost around $76. As of Tuesday morning, WTI crude was trading north of $123 a barrel.
In response to higher oil prices, energy stocks have led the market this year, with the S&P Energy Sector (XLE) up some 57%. The remaining 10 sectors in the S&P 500 have lost ground this year.
Against this backdrop, for any other sector of the market to catch up with energy would take a dramatic turnaround. And even if the price of oil stalls out this year, given the performance in global stocks, bonds, and cryptocurrencies, investors will be hard pressed to find returns elsewhere.
But with more executives talking about the risk of recession amid aggressive interest rate hikes from the Fed, flagging economic growth could make the demand picture for oil more challenging. That's a particular concern as some experts believe the surge in gas prices that has followed oil higher is already leading to "demand destruction."
And with this many investors confident oil will remain the place to be in markets in 2022, we're reminded of the old investing cliché that the market manages to frustrate the largest number of people at any point in time.
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Myles Udland is the senior markets editor at Yahoo Finance. Follow him at @MylesUdland
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