While the spotlight has been on technology for much of 2023’s market rally, energy shouldn’t be ignored. Stubborn inflation is keeping these prices high, making way for trading opportunities in the sector.
The S&P 500 Energy Index has been steadily climbing over the summer, as more vacationers traveling have increased a demand for fuel. The index’s quarter-to-date return is about 13%.
One reasons for the energy sector’s strength has been rising oil prices, combining factors like supply/demand and geopolitics. This translates to more pain at the pump for consumers. And oil could stay elevated for some time as the Fed continues trying to rein in inflation.
“It keeps hitting new highs all year, and is up nearly 40% from the 52-week low, says S&P Global Market Intelligence,” reported Investor’s Business Daily. “Higher energy prices are a key driving factor of stubbornly high inflation. Some of energy’s effects on prices are indirect.”
“The primary driver of the miss on core (inflation) was driven by a swing in airline fares from down 8.1% last month to up 4.9%, which is simply an example of how energy prices bleed into core as 40% of airline costs are driven by energy prices,” said Jay Hatfield, CEO at Infrastructure Capital Management.
2 Energy ETFs to Consider
If the broader sector sustains its uptrend, then traders will want to consider a position in the Direxion Daily Energy Bull 3X Shares (ERX ). The fund seeks daily investment results equal to 200% of the daily performance of the Energy Select Sector Index, which is provided by S&P Dow Jones Indices and includes domestic companies from the energy sector, which includes the following industries: oil, gas, consumable fuels, and energy equipment and services.
Building off this theme is a spike in oil and gas services as inflation continues to remain high. As such, the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (GUSH ) has been producing triple-digit year-to-date gains.
The fund seeks daily investment results of 200% of the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index. GUSH invests in financial instruments and securities of the index. It also invests in ETFs that track the index. Additionally, it invests in financial instruments providing daily leveraged exposure to the index or ETFs that track the index.
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