“Exxon’s P/E Ratio Has Surpassed Nvidia’s” — Structural Changes in the 2026 Market and Statistical Buying Levels Identified by DataTrek

DataTrek Research co-founders Nick Colas and Jessica Rabe provided an in-depth analysis of the market environment as of the end of March 2026 on their podcast, "What Did We Learn (WDWL)." The core themes were the rationale for holding energy stocks, statistical buying levels for the S&P 500 and NASDAQ, and market signals from the VIX. By presenting a "data-driven decision framework" rather than an emotional market outlook, this discussion contains essential insights for investors currently facing market volatility.

1. Energy Stocks — The reason why you "should never sell" has been proven

1-1. The smallest sector in the S&P 500 becomes the biggest contributor

Nick Colas has long argued, "Never sell energy stocks because they are the only hedge against an oil shock." Those words became reality in the spring of 2026. Amidst the surge in crude oil prices due to the situation in Iran, the energy sector has become effectively the only sector that is functioning.

A notable backdrop is that energy had shrunk to about 2% of the S&P 500 sector weight, a historical low compared to the 1980s when Colas entered the industry (at 20%). It is an ironic paradox that this sector, which many institutional investors decided to suppress to zero or less than 1% by choosing to "move funds to tech," is the one performing best this year.

1-2. Comparison with the 1990 Gulf War — The signal that "the bottom is still ahead"

Colas analyzes the current market by comparing it to Iraq's invasion of Kuwait in 1990. At that time, crude oil roughly doubled to $40–$45 within a few months. And there is one important observation: "Stock prices bottomed in mid-October 1990, the same day as the high in oil. Long before the start of military action (January–February 1991)."

The implication for the present derived from this historical observation is this: In the current situation where crude oil continues to hit new highs (at the $102 level at the time of recording), the signal for a bottom has not yet appeared. Energy stocks also recorded new highs on the same day, and Colas states, "New highs mean momentum is continuing. It can only be considered stable once a state of not hitting new highs continues for at least a week."

1-3. Exxon surpasses Nvidia's P/E ratio — Investors are choosing "certainty"

There is a fact from the program that caused the most surprise. Currently, Exxon is trading at a P/E (price-to-earnings) ratio of 25x, while Nvidia is trading at 20x (forward P/E), making the energy giant look "more expensive" than the symbol of the AI revolution. It goes without saying that no one had this in their forecasts at the beginning of the year.

Regarding this reversal phenomenon, Colas explains the "danger of judging cheap or expensive based solely on P/E." What is important is the "Reinvestment Rate." Energy companies return about half of their net income as dividends and reinvest the rest. On the other hand, tech companies (excluding Apple) are reinvesting almost all of their net income into generative AI. "Choosing between them is a choice between taking on the reinvestment and uncertainty of the scientific experiment called AI, or taking certain cash returns."

Institutional investors are beginning to value this choice of "energy's capital discipline and certain dividends."

2. "Statistically buyable levels" for the S&P 500 and NASDAQ

2-1. The focus on the 2-sigma level of 50-day returns

The core of the analysis presented by DataTrek's Jessica Rabe is "standard deviation analysis of 50-day returns based on data since 2010." The 2008 financial crisis is intentionally excluded because its nature as a "simultaneous collapse of multiple systems" is unique.

In the case of the S&P 500, a decline of 9.6% or more over 50 trading days (about 2.5 months) is a "2-sigma (2 standard deviation)" anomaly that has occurred with only a 4% probability since 2010. And when this level is reached, the subsequent average return over 50 trading days is +9.6%, with a win rate of 92%. For the NASDAQ, a decline of 11.9% or more over 50 days is the 2-sigma level, and under the same conditions, the average is +9.6% with a win rate of 81%.

2-2. The current situation of "2% more" at the time of recording

At the time of recording, the 50-day return for the S&P 500 was -8.1% (1.5% away from the 2-sigma level of -9.6%), and the NASDAQ was -10.8% (1.1% away from the 2-sigma level of -11.9%). As a concrete threshold, it was indicated that this level would be reached if the S&P 500 fell below 6,250 and the NASDAQ below 20,650.

Rabe emphasized, "This is not declaring a bottom. However, historically speaking, when falling below these levels, the subsequent 50-day return is generally positive and has high consistency. However, there is a condition—it must be accompanied by policy responses."

2-3. 2022 as an exception — "When policy does not work"

The year 2022 is cited as an exception where this statistic broke down. During a period of intentional tightening due to the Fed's rapid interest rate hikes, even when the market was sold off extremely, 'policy responses' continued to act in the opposite direction. The S&P 500 reached -22% and the NASDAQ reached -33%.

The concern this time lies here. A 'factor the Fed cannot control,' such as the conflict with Iran, could increase inflationary pressure and instead prompt a policy shift toward interest rate hikes. The fact that Fed Funds futures are reversing from 'expectations of rate cuts' to 'possibilities of rate hikes' supports this concern.

3. VIX and 'Policy Response' — What is Truly Needed for Market Recovery

3-1. Win Rate Table by VIX Level

The forward-looking return analysis by VIX level presented by DataTrek is also a useful framework for considering the current market. When levels are classified by the standard deviation of the VIX from its long-term average, the following trends can be observed.

At 'moderately high' levels where the VIX is between 27 and 43 (1 to over 2 standard deviations), a win rate exceeding a coin toss is confirmed across all time horizons: 1 week, 1 month, 3 months, 6 months, and 1 year. However, once the VIX exceeds 43, the relationship begins to break down, and once it exceeds 51, the 1-week win rate falls below 50%, and even at the 6-month mark, it remains at only 66%.

3-2. Why Win Rates Drop at High VIX — The Presence or Absence of 'Policy Response'

Kolas explains this seemingly paradoxical phenomenon as a 'dialogue between the market and policymakers.' 'The VIX is a brute-force way for the market to tell policymakers, "You've gone too far, a change in direction is necessary."'

A typical example of this mechanism functioning was the tariff shock in April 2025. On the day the VIX reached 52, President Trump suggested a policy change by saying, 'The numbers are different, we will negotiate,' and the market reversed. Similarly, on Christmas Eve in 2018, when Fed Chair Powell stated that 'the neutral rate is higher' and the VIX reached 36, a policy pivot was declared 10 days later.

The problem is this time. What could serve as a 'policy response' to the energy price issue? While there are attempts such as releasing the Strategic Petroleum Reserve or granting exemptions to the Jones Act, Kolas points out, 'The world consumes 110 million barrels per day, and 20% of that passes through the Strait of Hormuz. Solving this with the SPR or domestic measures has limitations as an approach to the fundamental problem.'

4. Three Factors That Make This Market Different from a 'Normal Correction'

4-1. The 'Triple Threat' of Recession Fears, War, and Monetary Policy

When organizing historical cases where the S&P 500 fell by more than 10% in a year (12 cases since 1928), they can be classified into three categories. The first is recession (8 cases, average -25%, -15% to -20% excluding the Great Depression). The second is war (1940, 1941, 2002, average -15%). The third is policy response (2022, -18%).

The problem this time is that all three are exerting pressure simultaneously. Recession fears due to high oil prices, geopolitical risk from the Iran conflict, and concerns about the Fed shifting to rate hikes due to tariff inflation combined with crude oil inflation—Kolas summarizes, 'It is precisely because these three inputs are overlapping that we are at a level of -7% year-to-date.'

4-2. The Uniqueness of This Time: 'The Solution Is Not Clear'

The 1990 Gulf War had a 'clear goal' of Iraq withdrawing from Kuwait, and prices stabilized after the resolution. However, Iran today has a fundamental motive of 'maintaining its status as a key player in the region by violently expressing its presence in the Middle East.' This is a structural problem that is difficult to change without a change in leadership, which is the perspective Kolas heard from Qatari royalty.

“Historical analogies only partially apply this time.”—This recognition encourages important caution in investment decisions.

Summary — The Value of Having a 'Judgment Axis Based on Statistics and History'

The framework for investment judgment presented by DataTrek's analysis is clear. The '2-sigma levels' of 6,250 for the S&P 500 and 20,650 for the NASDAQ show statistically high win rates (92% and 81%), but the premise is that 'a policy response must accompany them.' The 1990 analogy that 'there is no signal of a bottom' as long as energy stocks continue to hit new highs is also a valid reference point.

However, this time there is the uniqueness of the triple threat structure and the 'difficulty of policy response.' To borrow Kolas's words, 'The bullish case and the bearish case are equally valid. What is important is to use the system you have to find an appropriate entry level and understand why history functions the way it does.'

Do not be swayed by emotion; instead, rely on a decision-making framework based on numbers and history—that is the most important message of this discussion.

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