Inflation has hit its highest levels in 40 years. And there is one corner of the market that is thriving: energy. The XLE is up more than 26% this year.
No other sector has performed nearly as well. Financials is a distant second, at less than 2%.
Historically, high inflation has been accompanied by outperformance in the energy sector and now is the perfect time to own commodity-exposed investments.
A summary, year-to-date, indicates oil equipment & services and integrated oil & gas to be the highest performing segments of the energy industry. *Excluding coal.
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An overwhelming majority of the top-returning sector ETFs this year are in the energy sector. VV Oil Service, SPDR Energy, VG Energy, and Fidelity MSCI Energy have all returned 25% or more.
Take a look at MicroSectors US Big Oil 3X Leverage fund (NRGU), which magnifies the sector’s move by three times.
It’s interesting to note that neither Gold, nor Real Estate are holding up as well as energy. Elsewhere, altcoins such as Bitcoin are also not providing the type of inflation hedge investors expected.
It would appear that inflation could keep running, as much of the pressures are due to government policies that won’t undo themselves with higher short-term rates.