Wall Street bitten by sell-offs. But watch out for this stock sector, the best since the beginning of 2025.
Fears for the start of a possible prolonged sell-off phase on Wall Street, after the strong sell-offs of the day before, which led the Dow Jones to capitulate by 450.94 points, or 1.01%.
Also down was the S&P 500, which backtracked from the highs recently tested, falling by 0.43%, while the Nasdaq Composite left 0.47% on the ground.
Investors explained the sales with the persistence of fears about the risk that US inflation will once again raise its head in a significant way, due to the economic policy of the second administration of Donald Trump, defined as inflationary.
In the meantime, while there are those who fear the advent of a new catastrophic phase in 2025 for the S&P 500 index, there are also those who point out the “Winner” shares, or winners, since the beginning of the year: shares that have benefited precisely from the expectations on the next moves that will be announced by Trump.
Not only that: another element that has supported this stock sector, as confirmed by the trend of a specific ETF, is the expectation of a shower of dividends and buyback operations by some champions active in the sector, where several investments are flowing as part of an ongoing rotation process.
Buy boom on energy shares YTD, thanks to natural gas, but not only. Watch Out for the ETF
The best stocks traded on Wall Street at the start of 2025 are energy stocks, as demonstrated by the trend of the S&P 500 Energy ETF (XLE), up over 7% YTD, compared to the almost 4% increase, in the same time frame, of the S&P 500 index.
The credit goes to natural gas prices, rising due to demand that has strengthened in the midst of freezing temperatures in the United States, but not only.
This was confirmed by Louis Navellier, founder and chief investment officer of Navellier & Associates, who explained that “the strength of the energy sector is represented by natural gas”, adding however that the Trump factor is also acting as an assist: “The Trump administration’s Drill, Baby Drill is bullish for natural gas and liquefied natural gas (LNG) prices ”, said the expert, referring to the American president’s initiatives aimed at deregulating the energy industry, accelerating permits and increasing exports.
Rally for Plains All America Pipeline and Baker Hughes shares. Watch out for BP among the big ones
This explains the rallies that have seen Plains All America Pipeline (PAA) as protagonists among energy sector shares, which have cashed in a gain since the beginning of 2025 equal to +19%.
Over the same period, Baker Hughes (BKR) shares were also in the mix, rising about 13% after the energy services giant reported solid Q4 2024 results, thanks to good demand for its gas supply infrastructure.
Shares of MPLX (MPLX), a company specializing in the gas pipeline business, also performed well, rising 12% on the S&P 500.
Among traditional oil giants, gains were more modest. Giants ExxonMobil (XOM) and Chevron (CVX) rose 3% and 9%, respectively.
Among the BIGs, BP’s YTD trend, which was decidedly better than its big rivals, equal to a 17% rally stands out, at a time when the British giant is returning to focus on the oil and gas segment, pressured by activist investors, who are asking to take a step back from the renewable energy market.
Dividends and buybacks, the other element that triggered the wave of buying
But, in fact, what makes energy stocks particularly attractive in general are also dividends and buyback operations taken into account by investors.
“Right now, in the oil and gas sector, it’s all about discipline in managing capital, it’s all about distributing cash to shareholders,” commented senior portfolio manager Rob Thummel. A discipline that comes, among other things, at a time when energy companies’ production is at record levels.
It is worth mentioning among the latest news, the one that affected Devon Energy this week: the group announced that it had reported better-than-expected earnings in the fourth quarter, in the wake of production that rose to an all-time high.
The company thus delighted its shareholders, communicating the decision to increase quarterly dividends by 9% over the course of 2025.
In this regard, Thummel also pointed out that not only are energy companies producing more oil and gas, but they are also doing so “more efficiently, consequently reducing drilling costs ”.
Is the euphoria destined to fade? The two factors weighing on the energy sector
That said, after this buying phase, some experts are calling for caution, signaling that perhaps the time has come to cash in.
Two factors could in fact slow down the euphoria phase, despite natural gas futures recently testing the records of the last two years, as explained by Rob Haworth, senior investment strategist at U.S. Bank Asset Management, interviewed by Yahoo Finance: “One factor is the transition to spring, which will obviously reduce demand for methane gas. A second factor could be the end of the war between Russia and Ukraine, which could bring the supply of Russian energy back to the global market ”.
It should also be remembered that, after the rally at the beginning of 2025, oil prices are reporting a practically flat performance. “I don’t believe in this rally,” said Stewart Glickman, deputy director of research at CFRA Research, referring to indications from OPEC+ that the arrival of new barrels could be delayed for a fourth time, on the back of concerns about an oversupply situation.
“ We are not in a real energy shortage, and investors should perhaps tone down their enthusiasm for the prospects of energy companies in 2025,” Glickman concluded.
Original article published on Money.it Italy 2025-02-21 11:40:24. Original title: Paura per Wall Street, ma occhio alle azioni migliori da inizio 2025
