Wall Street Sees Flaws in ‘Drill, Baby, Drill’ Trump Trade Logic
- More oil, gas production upsets delicate supply-demand balance
- Capital discipline makes energy stocks appealing, Samana says
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Donald Trump has a familiar refrain for how to fight inflation and stimulate the economy: “Drill, baby, drill!” But while the Republican presidential candidate’s fondness for the oil exploration has sparked previous rallies in energy stocks, Wall Street pros are largely avoiding this part of the “Trump trade.”
The reason is simple. Any policy seeking more oil and gas production can upset a delicate supply-demand balance and drive fossil fuel prices lower, money managers warn. And although that should help reduce consumers’ energy expenses, it’s hardly a recipe for higher profits, and therefore rising stock prices, in the energy industry.