The energy sector defied a decline in September, offering investors opportunities to boost their portfolios with ETFs such as the Invesco DB Energy Fund (DBE).
“The energy sector jumped 9.3% in September, representing the best monthly return since gaining 21.5% in February, according to FactSet data, but what was also notable were the gains industry versus everything else, ”a report from MarketWatch said.
“The second best sector in September was financials, down about 2%, meaning the energy sector outperformed the second best sector in September by more than 11 percentage points,” the report added.
The report also noted that the energy sector has outperformed even some heavyweights proven to be in times of downturn, such as healthcare and utilities. The report also noted that “the folks at Dow Jones Market Data say this is the first time the energy sector has been the only sector up in a month since June 2008.”
DBE seeks to track the excess return of the DBIQ Optimum Yield Energy Index, which aims to reflect changes in the market value of the energy sector.
Commodities in the index include light sweet crude oil (WTI), furnace oil, Brent crude oil, RBOB gasoline and natural gas. The fund invests in futures contracts in an attempt to track its index.
Provide inflation hedge
Inflation has been a priority this year as the economy continues to recover from the effects of the pandemic. Consumer prices have moved in a reflationary environment where stimulus dollars are being injected into the economy.
The Federal Reserve has already noted the improvement in economic data it has seen in recent times and is ready to cut stimulus measures. As such, they will look to start raising rates in 2022.
Rising prices for commodities like oil and natural gas give investors an additional element to hedge against inflation. This can be achieved with funds like DBE.
“This AND F provides exposure to some of the world’s most popular commodity futures. This includes light sweet crude oil, heating oil, Brent crude oil, RBOB gasoline and natural gas, ”suggested an analysis of the ETF database. “Exposure to commodities in a portfolio used to be a binary choice, whether you invest in it or not. Now, commodities have proven to be powerful inflation hedging tools capable of generating powerful returns for an individual portfolio. “
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