The thesis
“Energy stocks outperform tech stocks when inflation is high.”
How buffet read it
$10,000 invested in the Energy sector ETF (XLE).
Benchmarked against the Technology sector ETF (XLK).
Period: 2016–2026, the last ten years.
Dividends reinvested.
XLE · 2,513 trading days · benchmark XLK
$10,000 became
$0
The same money in Technology sector would have been $87,648 over 2016–2026 — the thesis came up short by $60,615.
The worst stretch
−66.8%, May 2018 to March 2020 — you would have sat through 22 months of that, and it took until January 2022 to get back to level.
Technology sector fell 33.6% at its worst over the same period. The thesis moved 29.6% a year against 25.0% for the index.
Where the thesis was wrong
The thesis lost to its own benchmark: XLE returned +170.3% from 2016 to 2026, while XLK returned +776.5% over the same period, a gap of $60,615 on $10,000 in. The conditional claim — that energy beats tech when inflation is high — was never tested here, because this run holds XLE for the full ten years regardless of inflation. In 2020, XLE fell −32.7% while XLK gained +43.6%, a spread of more than 76 points in the wrong direction. The thesis did work in 2022, when XLE gained +64.3% and XLK fell −27.7%, but that single year could not recover the structural underperformance across the decade.
Counter-test
Same money, same schedule, parked in 1–3 month T-bills instead: $12,510.
Year by year
| Year | The thesis | XLK |
|---|---|---|
| 2016 | +9.4% | +3.6% |
| 2017 | −0.9% | +34.3% |
| 2018 | −18.2% | −1.7% |
| 2019 | +11.7% | +49.9% |
| 2020 | −32.7% | +43.6% |
| 2021 | +53.3% | +34.7% |
| 2022 | +64.3% | −27.7% |
| 2023 | −0.6% | +56.0% |
| 2024 | +5.6% | +21.6% |
| 2025 | +7.9% | +24.6% |
| 2026 | +42.1% | +29.3% |
What this verdict does not include
- US-listed stocks and ETFs only, priced on end-of-day closes.
- No tax, no trading fees, no slippage, no bid-ask spread.
- Dividends are reinvested, because closes are adjusted for them.
- Survivorship is not corrected for: only instruments that exist today are held.
- Only 10 years of history exist for this. Read it accordingly.
- The 'when inflation is high' condition cannot be modelled here — this runs buy-and-hold for the full ten-year period, not filtered to high-inflation regimes only.
- To isolate high-inflation periods (e.g. 2021–2023), a separate run with a narrower start date would be needed.
- XLE is used for energy; XLK is used for tech and set as the benchmark.
Keep this thesis
buffet re-runs it once a month and mails you the new number. Nothing else is ever sent.
Another thesis
Every verdict names something it could not test. That gap is usually the next thesis.
Run another thesis — $5