Short-Term Weakness may Provide an Attractive Entry Point for Investors in Energy ETFs

After rallying for much of 2022, the energy sector plunged by over 20% from June 8th through July 14th as fears of a looming recession began to mount.  While volatility may continue in the near term, we believe selloffs may provide more attractive entry points for investors, particularly those that remain underweight energy stocks.  While we concede that a deep global recession could negatively impact demand for fossil fuels in the near term, we believe longer-term supply-demand dynamics, as well as geopolitical influences, will likely support relatively high prices for oil and natural gas, which may continue to fuel robust earnings for energy companies.  Moreover, despite relatively strong performance since the Fall of 2020, energy stock valuations remain historically cheap.

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Posted on Thursday, August 11, 2022 @ 11:45 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.