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The energy sector has beaten inflation 71% of the time and delivered an annual real return of 9% per year on average. This is primarily because energy-focused companies’ revenues are tied to energy prices, a key inflation component. Higher energy prices lead to higher revenues and profits for energy companies.
So, as energy prices continue to climb, we think it could be wise to invest in quality energy ETFs—Energy Select Sector SPDR Fund (XLE), Vanguard Energy ETF (VDE), SPDR S&P Oil & Gas Exploration & Production ETF (XOP), and iShares U.S. Energy ETF (IYE). These ETFs have an overall A (Strong Buy) rating in our proprietary POWR Ratings system.
