A potential US recession and harsh comparisons to a stellar 2022 weigh on the prospects of energy stocks adding to last year’s stunning run, despite valuations still considered comparatively cheap.

The energy sector of the S&P 500 is up 4.2% year-to-date, marginally lagging the rise of the broader index. The sector surged 59% in 2022, an otherwise brutal year for stocks, which saw the S&P 500 fall 19.4%.

Energy bulls argue that sector valuations support the case for a third straight year of gains in what would be the first such performance for the group since 2013. Goldman Sachs, RBC capital markets and UBS Global Wealth Management are among Wall Street companies recommending energy stocks.

Despite last year’s run, the sector trades at 10x price-to-earnings, compared to 17x for the broader market, and many of its stocks offer robust dividend yields. The potential returns for shareholders were highlighted this week as Chevron shares rose nearly 5% after announcing plans to buy $75 billion worth of shares.

However, some investors worry that energy companies could struggle to grow earnings after big jumps in 2022, especially if a widely anticipated US economic slowdown hits commodity prices.

“The group appears to be holding up well, but there is some concern given that investors are worried about an economic slowdown and what that will mean for demand,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.

He said he was slightly overweight the energy sector, including shares in Chevron and Pioneer Natural Resources. Economists and analysts in a Reuters poll predicted US crude would cost an average of $84.84 a barrel in 2023, compared to an average price of $94.33 last year, citing expectations of global economic weakness. U.S. crude oil prices were recently around $80 a barrel.

At the same time, many investors have been adding to their holdings in energy stocks in 2022 after years of avoiding the sector, which has often underperformed the broader market amid concerns such as poverty capital city Allocation by companies and uncertainties about the future of fossil fuels. The sector’s weight in the S&P 500 has roughly doubled over the past year to 5.2%.

However, that momentum could wane, said Aaron Dunn, co-head of the value equity team at Eaton Vance.

“People have returned to energy in a big way,” he said. “In recent years we have had this tailwind that everyone has invested too little in energy. I don’t think that’s the case anymore.”

And while strong earnings reports are expected from energy companies in the coming weeks after a tumultuous 2022, those numbers may have set a high bar for this year.

With 30% of the 23 companies in the sector reported so far, earnings for the energy sector are expected to have risen 60% year-on-year in the fourth quarter and 155% for full-year 2022 Refinitive IBES. However, earnings are expected to fall 15% this year, the largest drop among the 11 sectors in the S&P 500.

Exxon Mobil and ConocoPhillips are among the reports due next week, when investors will also focus on the Federal Reserve’s latest monetary policy meeting.

“Last year was a terrific year,” said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management. “Now they have to try to exceed that to show growth and I think that’s going to be a challenge.”

Meanwhile, optimistic investors point to a shareholder-friendly use of cash by companies.

According to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, the energy sector’s dividend yield at 3.43% ended 2022, almost double the index as a whole. Energy companies conducted $22 billion in share buybacks in the third quarter, just over 10% of all buybacks in the S&P 500.

“From a total return perspective, I think energy still has room for differentiation versus the broader market,” said Noah Barrett, research lead for the energy and utilities sector at Janus Henderson Investors.

However, others believe there could be more value in areas of the market that have come under pressure over the last year. Eaton Vance’s Dunn said stocks in areas like consumer discretionary and industrials could look more attractive.

“Energy is probably doing well this year, but I think you have a lot of areas in the market that have done extremely poorly where we are finding excellent opportunities,” he said.