NEW YORK -U.S. energy shares are soaring as investors benefit from rising oil prices and a stronger-than-expected economy, while seeking to protect their portfolios from a feared resurgence of inflation.energy sector is up about 17% in 2024, roughly doubling the broader index's year-to-date return. Its gains have accelerated in recent weeks, making it the S&P 500's best performing sector in the past month.Some investors also believe rising energy shares could hedge against U.S.
Energy stocks have risen as a U.S. equities rally has broadened beyond the growth and technology companies that led gains last year. Investors' appetite for non-commodities-related sectors could take a hit, however, if inflation expectations keep rising and worries about a hawkish Fed grow. "Investors are looking at the world and they're seeing that the economy really isn't slowing down much ... at a time when there are various concerns over bottlenecks regarding supplies of commodities, especially oil," said Peter Tuz, president of Chase Investment Counsel Corp.
Analysts are also noting comparatively low valuations. The S&P 500 energy sector trades at 13 times forward 12-month earnings estimates compared to nearly 21 times for the overall S&P 500, according to LSEG Datastream. Marta Norton, chief investment officer in the Americas for Morningstar Wealth, said her firm owns shares of energy pipeline companies and other Master Limited Partnerships, or MLPs, which could protect against firmer inflation.