U.S. Energy Shares Soared High to Start 2022, Boosted by Inflation

Shares of U.S. energy companies are soaring in the early days of 2022, driven by a shift to so-called value stocks and assets that stand to benefit from the steepest inflation in nearly four decades.

The energy sector is up over 14% in the start of the year, against a 0.8% drop for the overall S&P 500. Energy market also posted the biggest gains of any S&P 500 sector last year, rising nearly 48%.

Other factors that boosted the sector’s performance is the Brent crude, that surged about 23% since early December and is near its highest level since late 2018.

Reuters reported that the rising energy prices have been a key factor over the past year in pushing up overall inflation. Consumer prices last month had their largest annual gain since June 1982.

Robert Pavlik, senior portfolio manager at Dakota Wealth Management said, “If oil is on the rise and natgas is on the rise, it is going to mean an increase in earnings for those companies that are involved in the energy sector.”

According to Refinitiv IBES, Pavlik is overweight the energy sector in his portfolios, owning shares of Chevron and Pioneer Natural Resources.

According to Willie Delwiche, an investment strategist with market research firm All Star Charts, Energy's 12.2% spread over the median sector performance in the first week of 2022 ranked as the second-biggest weekly outperformance of any sector over the past decade.

Peter Tuz, president of Chase Investment Counsel Corp said, “The group has a pretty good record of outperforming the market in inflationary periods and we are in an inflationary period.” The wealth management firm's energy stock holdings include Chevron, Baker Hughes and Halliburton.