2022 has been a brutal year for all types of financial assets with the S&P 500 down more than 25% YTD and equal amounts of pain for the bond market. This is the unfortunate reality of a slowing economy and a hawkish central bank.
However, one bright spot amid the turmoil has been energy stocks. YTD, the Energy Select SPDR (XLE) is up 47%. The biggest factor in this strength is the war between Russia and Ukraine which has led to tightness in supply and rising electricity prices for European countries and exacerbating the inflation situation. Another is that production was dramatically cut during the pandemic and this supply has not been fully restored, while demand was more resilient than expected.
