Maybe it’s wishful thinking, but trending election results seem to be going my way. I’m a low-tax, pro-business supporter, and I’m unashamed about my leanings because I believe that a strong economy benefits the whole of society.

With energy stocks on a tear into the final days of the midterms, I have some concerns about the investment merits of our slight overweight position. I think that a switch to Republican control will result in more accommodative policy for energy exploration and transportation. “More accommodative” is, of course, a low bar since Biden and Democrat-controlled Congress have been huge impediments to both.

Investors naturally assume that pro-energy policies are good for energy companies. Yes and no. The impingements that pro-green and anti-energy policies have are clearly correlated to higher oil prices and profits for energy companies. Green policy is precisely why energy stocks are at new highs. A shift to conservative control of the House of Representatives should be a negative for energy stocks and a positive for the market overall.

Mr. Biden’s unprecedented depletion of the Strategic Petroleum Reserve (SPR) can only mean he’s feeling the pinch at the ballot box of the tripling of pump prices since he took office. The SPR releases are surely election day maneuvering with a mind toward claiming that things are improving. Just imagine how energy would have performed if not for US stockpiles hitting the market and suppressing prices.

There are much better and more permanent ways to bring prices down: grant drilling permits, dial down the rhetoric on windfall profits taxes, and reinstate the Keystone pipeline. Don’t hold your breath on that happening under the current administration. Mr. Biden’s audacity is unmatched in asking oil companies to drill for more oil to suppress prices while at the same time suggesting profits earned are “unfair” and badmouthing exploration. Nobody came to the energy industry’s rescue in 2020, with energy prices at zero. Taxes seem more unfair than profits.

Segment has been gradually increasing our overall equity exposure from cash we raised earlier in the year. We sold some energy stocks this past summer when we feared a recessionary pinch that has yet to materialize, much to my current dismay. Yet, if the House flips, we may get a post-election rout in energy that could allow us a larger over-allocation at reasonable prices down the road.

Stay tuned.

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