--- title: "Jefferies Identifies High-Quality Energy And Materials Stocks As Cyclical Rotation Accelerates" type: "News" locale: "en" url: "https://longbridge.com/en/news/296260382.md" description: "Jefferies analyst Lloyd Byrne identifies energy and materials stocks as high-quality cyclical favorites, citing surging refined-product margins and a high-real-rate environment. He highlights Valero for its direct exposure to record diesel crack spreads, while noting upstream producers and specific materials firms also benefit. Data shows investors are rotating from semiconductors into cyclicals, with significant ETF inflows into materials, industrials, and energy sectors." datetime: "2026-08-18T18:46:43.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/296260382.md) - [en](https://longbridge.com/en/news/296260382.md) - [zh-HK](https://longbridge.com/zh-HK/news/296260382.md) generator: "portal-rs" --- # Jefferies Identifies High-Quality Energy And Materials Stocks As Cyclical Rotation Accelerates Jefferies analyst Lloyd Byrne wrote in a note on Monday that surging refined-product margins, stronger gas-fired power demand, and improving earnings estimates are **providing clear tailwinds for energy stocks**, even as valuations and technicals appear stretched. Byrne showed that the **clearest source of strength in the energy market is refining**. The six-month New York Harbor diesel-to-crude spread topped $100 (HOCL1 Index on Bloomberg) and has moved in close tandem with the Energy Select Sector SPDR Fund (XLE). Included in the *"**10 Charts That Mattered**"* report that Byrne published for clients on Monday is chart No. 9, titled *"**Energy & Materials Among High-Quality, High Real Rate Favorites**."* He makes the case that rising refined-product margins and a high-real-rate environment favor several energy and materials stocks. Materials do not benefit from refining margins, but rather from the higher rate environment. On the energy side, he outlined how **Valero is the top crack-spread play** because it directly benefits from higher refining margins. He then pointed out that **ConocoPhillips and EOG are upstream producers**, which means they benefit mainly from higher crude oil and natural gas prices, not higher refining margins, while **CF Industries, Avery Dennison, and Crown Holdings** are materials stocks that benefit in a higher rate environment. He posted a chart showing the 10-year Treasury inflation-protected yield at about **2.5%**, placing real interest rates in the **79th percentile** since 1997. In other words, inflation-adjusted borrowing costs are extraordinarily high. Byrne sees **energy and materials as attractive havens for investors** in a high-real-rate regime, but only Valero has direct exposure to the diesel crack-spread blowout. > Diesel crack hits record $102. This is absolutely unprecedented. > > Industrial economy either grinds to a halt or consumers about to be hit with the biggest energy pass through in history pic.twitter.com/OtAdgrCvb3 > > — zerohedge (@zerohedge) August 17, 2026 He then pointed to ETF flows, which only indicate that **investors are favoring cyclicals**. **Materials ETFs have received net inflows equal to 28.6% of assets year to date**, followed by industrials at 16.7% and **energy at 14.1%.** Technology, on the other hand, stands at only 4.1%. Conversely, investors have been **dumping semiconductor stocks**. The **key takeaway** is that investors are rotating out of semiconductors and into cyclicals, particularly materials and energy. Energy's robust year-to-date inflows remain intact, with widening refining margins and positive earnings revisions, which may only suggest further rotations into cyclicals. *Professional subscribers can read more about crack spreads, the Gulf energy crisis, and US consumers here onour new Marketdesk.ai portal.* ### Related Stocks - [VLO.US](https://longbridge.com/en/quote/VLO.US.md) - [XSD.US](https://longbridge.com/en/quote/XSD.US.md) - [VAW.US](https://longbridge.com/en/quote/VAW.US.md) - [SMH.US](https://longbridge.com/en/quote/SMH.US.md) - [MXI.US](https://longbridge.com/en/quote/MXI.US.md) - [IYE.US](https://longbridge.com/en/quote/IYE.US.md) - [VIS.US](https://longbridge.com/en/quote/VIS.US.md) - [SOXX.US](https://longbridge.com/en/quote/SOXX.US.md) - [SOXL.US](https://longbridge.com/en/quote/SOXL.US.md) - [DIG.US](https://longbridge.com/en/quote/DIG.US.md) - [USD.US](https://longbridge.com/en/quote/USD.US.md) - [SSG.US](https://longbridge.com/en/quote/SSG.US.md) - [SOXS.US](https://longbridge.com/en/quote/SOXS.US.md) - [GUSH.US](https://longbridge.com/en/quote/GUSH.US.md) - [DRIP.US](https://longbridge.com/en/quote/DRIP.US.md) - [USO.US](https://longbridge.com/en/quote/USO.US.md) - [BNO.US](https://longbridge.com/en/quote/BNO.US.md) - [UCO.US](https://longbridge.com/en/quote/UCO.US.md) - [SOXQ.US](https://longbridge.com/en/quote/SOXQ.US.md) - [PSI.US](https://longbridge.com/en/quote/PSI.US.md) - [FTXL.US](https://longbridge.com/en/quote/FTXL.US.md) - [JEF.US](https://longbridge.com/en/quote/JEF.US.md) - [XLE.US](https://longbridge.com/en/quote/XLE.US.md) - [COP.US](https://longbridge.com/en/quote/COP.US.md) - [EOG.US](https://longbridge.com/en/quote/EOG.US.md) - [CF.US](https://longbridge.com/en/quote/CF.US.md) - [AVY.US](https://longbridge.com/en/quote/AVY.US.md) - [CCK.US](https://longbridge.com/en/quote/CCK.US.md) ## Related News & Research - [Diesel margins soar to record high. Valero and Marathon stocks are winning.](https://longbridge.com/en/news/296256298.md) - [Cibc World Market Inc. Sells 57,805 Shares of Valero Energy Corporation $VLO](https://longbridge.com/en/news/296758215.md) - [Essential Partners LLC Sells 3,903 Shares of Valero Energy Corporation $VLO](https://longbridge.com/en/news/296324644.md) - [Valero publishes 2025 ESG report](https://longbridge.com/en/news/296250286.md) - [Diversify Advisory Services LLC Invests $1 Million in Valero Energy Corporation $VLO](https://longbridge.com/en/news/296454381.md) --- > **Disclaimer: This article is for reference only and does not constitute any investment advice.**