Why Energy isn’t Soaring

Where are We in Terms of Enery

While the majority of sectors within the U.S. economy are soaring high right now, there are two sectors in particular that are struggling. Nowhere is this more obvious than if you look over the end of day results for Friday, January 13th. While most other sectors saw returns of 0.25 percent or more, the energy and utilities sectors both hovered right around the breakeven point. Utilities lost 0.02 percent, and energy gained a mere 0.04 percent over this trading day.

Look at this in comparison to financials (0.30 percent), technology (0.27 percent), and healthcare (0.29 percent). These sectors each have had their share of difficulties, and each has struggled to return positive gains at various points in the last 12 months. However, thanks to political changes in the United States and the economic gains that are predicted to follow, each of these sectors is poised in its own unique way to start realizing gains. For long term investors, and even short term investors that can time things well, there are a lot of new opportunities being created thanks to this. Binary options traders especially stand a lot to gain because of the low risk involved on each individual position that is taken out. Of course this can add up, but by carefully scrutinizing each trade that you make, this can be carefully guarded.

But the energy sector, and the utility sector right behind it, are not yet seeing these boosts, even though oil is set to increase in value. Traders are taking out positions here, and then seeing losses, unsure of why this is. Much of it has to do with the levels of uncertainty that oil still has around it. Yes, oil is currently in an upswing, but the last few years have cast a large shadow of doubt over the future of the world’s most highly traded commodity. Even though it is currently rising in price, a lot of investors have seen that oil’s pricing is largely up to factors that cannot be accounted for. If Saudi Arabia decided tomorrow that it wanted to double production, the price of oil would drop drastically, hurting the energy sector as a result of this. Utilities would be right behind.

However, it is definitely worth pointing out that the energy sector is still outpacing the S&P 500 for the year. Even though it is still early in the calendar year, energy has shown that it can take charge and lead the way for the economy. It probably won’t this year because of the many changes that have investors from around the world excited to buy other assets, but energy is not likely to see losses in 2017. It’s a possibility, of course, but with the way things have progressed over the last several months, if policies toward oil and energy in general stay unmoved, then energy should be a solid sector. The issue is whether or not it will keep up with the economy as a whole. With all of the buzz going around financials and healthcare right now, it will be a tall order for energy and utilities to keep pace with the S&P as a whole, making it far less attractive when it comes to investment.
This also creates opportunity, especially for the short term investor. Because this type of movement has the potential to alleviate volatility, gains should be a little bit more predictable in nature. If your binary options broker offers trades on sectors or ETFs, this could be a great place to look. If not, keep in mind that most brokers offer the big two oil stocks in Chevron and Exxon Mobil.