While Canadian energy companies have proven resilient, the recent divergence between commodity prices and energy stock performance warrants closer scrutiny. Despite a notable decline in commodity prices since the quarter’s inception, energy stocks have exhibited unexpected relative strength. This disparity could indicate a potential overvaluation in the sector, driven by factors such as investor sentiment and heightened geopolitical tensions. As such, we believe it prudent to reassess the energy sector, considering the potential risks associated with a prolonged disconnect between underlying fundamentals and stock prices.

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