If you still don’t believe that a major stock market rotation is underway, consider the following. Over the past year, the price of crude oil has fallen by nearly 10 percent. Over the same span, the iShares Global Energy ETF (NYSE: IXC) has risen more than 20 percent.

As you might expect, this fund’s largest holdings are Exxon Mobil (NYSE: XOM), Chevron (NYSE: CVX), and Shell plc (NYSE: SHEL). Combined, those three companies account for more than a third of the fund’s total assets.

Those businesses are referred to as “big oil” for a reason. They are among the largest producers of oil in the world. The price of crude oil is the single largest determinant of their profitability.

That is why Wall Street’s recent infatuation with the energy sector is a bit perplexing. According to those companies’ fiscal 2025 Q4 and full year results, last year was nothing special.

For example, a few weeks ago Chevron reported adjusted/diluted earnings per share of $1.52 during the fourth quarter. That is 16 percent lower than the $1.82 reported for the previous quarter, and 26 percent less than the $2.06 booked during the fourth quarter of the previous year.

Nevertheless, CVX is up 20 percent this year. The explanation for that confounding juxtaposition is a case of simple math. A year ago, its trailing price-to-earnings ratio (PER) was 16; now, it is closer to 27.

In other words, these companies aren’t making more money. In fact, they are making less. However, Wall Street is willing to pay a lot more for those earnings now than it was a year ago.

In short, that is why IXC has taken off recently. If seeing is believing, then take a look at the fund’s share price behavior over the past two months (boxed area in the chart below).

Bursting Bubble

At the same time the energy sector was rising, tech stocks were tanking. Through last week, the iShares U.S. Technology ETF (NYSE: IYW) was down 4 percent this year.

The fund’s top three holdings are NVIDIA (NSDQ: NVDA), Apple (NSDQ: AAPL), and Microsoft (NSDQ: MSFT). Those three stocks account for 45 percent of the fund’s total assets.

That is a good thing when the tech sector is hot, which it was until recently. Over the past three calendar years, IYW produced an average annual total return of 39 percent.

On a compounded basis, that equates to a gain of 170 percent in just three years. Sooner or later, that bubble had to burst. In this case, it appears that the bubble is bursting slow enough to avoid a collapse.

Blue Collar Stocks

Usually, the bursting of a bubble of this magnitude pulls down the rest of the stock market with it. Think back to 2008, when the collapse of the real estate market triggered a 50 percent decline in the S&P 500 Index.

For that matter, go back to the year 2000 when the implosion of dot com stocks was the precursor of a 40 percent drop by the S&P 500. That analog is why many stock market analysts feared that the bursting of the artificial intelligence (AI) bubble might take down the entire stock market with it.

Fortunately, that does not appear to be happening. Instead, Wall Street is selling overpriced tech stocks and reinvesting that money into other sectors of the economy.

Hence, the robust performance of the energy sector this year. Also, consumer discretionary and industrial stocks are soaring in popularity. In short, “blue collar” stocks are back in vogue.

That is good news for investors with a tactical allocation plan that favors value stocks. They have been waiting for this day for several years, and now it is here.

However, it is bad news for index investors. While tech stocks have been falling and energy stocks rising, the S&P 500 Index has gained no ground this year.

This is not a case of Wall Street temporarily hiding out in one asset class until the coast is clear. If it were, then bond yields would be falling, or commodity prices would be rising.

That isn’t happening. Instead, the current rotation out of tech stocks represents a sea change in sentiment on Wall Street. And this time, there is a lot of money to be made in other sectors of the market if you know where to look for it.