Displaying items by tag: oil

(New York)

With rates rising and yields finally responding in a big way, you may have been wondering which ETFs tend to perform well in such periods. With that in mind, here is a list of the best performing ETFs in periods of rising rates (since 2008). The stats are from thirty day periods of rising rates, which have occurred 18 times since 2008. The best four are: VanEck Vector Oil Services ETF (6.53% average gain), the SPDR S&P Regional Banking ETF (4.9%), the United States Oil Fund ETF (4.54%), and the SPDR S&P Oil & Gas Exploration & Production ETF (3%).

FINSUM: Oil and banking, not really a surprise, but certainly a good reminder for investors. The worst performing funds in the same period tended to be gold funds.

(Houston)

You want to know an asset class that has performed well in periods of rising rates? Take a look at oil. In periods of quickly rising rates and yields, oil and oil-related stocks have done very well. In fact, Van Eck’s Vectors Oil Service ETF (OIH) has been the best performing fund of its type in such periods. “Shares in the VanEck Vectors Oil Services ETF saw a 6.5 percent boost over the month when rates jumped, while shares of the United States Oil Fund ETF ran up 4.5 percent”, according to Kensho.

FINSUM: Oil and banks tend to do well in periods of rising rates. The former because rising rates usually mean a strengthening economy, and the latter because of both an improving economy, but also wider net interest margins.

(Houston)

It is a trying time to be picking where to allocate capital. Bonds are getting walloped and rate rises and trade war fears are weighing on stocks. Recession looms as a threat. With all that in mind, Goldman Sachs thinks it is a good time to buy MLPs. MLPs have been roughly flat this year, but GS thinks good times are ahead. Kinder Morgan is one of the bank’s top picks and they believe the sector will rise on improving cash flow and gains that result from simplifying their corporate structures (most will likely change to C-Corps following last year’s change in the tax code).

FINSUM: MLPs have been pretty flat and this is not the first time Wall Street analysts have called for a surge. Still, this is interesting to consider.

(Houston)

The oil market is continuing to thrive and the near-term outlook is strong. WTI oil, the US benchmark is currently trading at over $72 per barrel, while Brent, the world’s benchmark is at $80. The commodity is moving higher as markets are worried it will not be easy for producers to easily offset the losses of production in Venezuela and Iran, meaning supply may be constrained. OPEC generally agrees that when oil gets to $80 or above, it crimps demand.

FINSUM: The near term outlook for oil looks strong because of renewed US sanctions on Iran. However, in the longer term, the trade war seems likely to take a toll on emerging market economies, which will send oil demand and prices sagging.

(Houston)

Many investors are simply unfazed by the current trade war erupting between the US and China (just look at share prices for evidence). However, even those who may be bullish on equities need to be worried for oil. While the increasing sanctions on Iran are supportive of prices, a trade war would likely be very bad. The reason why is that increasing tariffs would likely cause an economic downturn in emerging markets, which would then heavily sap oil demand, leading prices lower.

FINSUM: The oil and other commodity markets are demand-driven (and realistic) in a way that stocks aren’t. Watch them for where the economy is actually headed.