According to the Zhitong Finance APP, the SPDR Energy Select Sector ETF (XLE.US), which tracks the S&amp;P 500 Energy Sector, surged 7.8% in the first quarter of 2025, far exceeding the S&amp;P 500 Index, which declined 4.4% during the same period. This fund recorded the largest quarterly gain among the S&amp;P 500 constituents, despite a slight drop in oil prices. The fund includes companies in sectors such as oil production, drilling, refining, and transportation.
U.S. President Trump's trade war has shifted the market narrative from concerns about an economic &#34;soft landing&#34; and potential interest rate cuts by the Federal Reserve to worries that tariffs will reignite inflation, erode consumer confidence, and increase the likelihood of an economic recession. Investors have turned to energy stocks for stability, as the sector's inflation-resistant characteristics make it a defensive play, and energy companies have achieved strong profits driven by high commodity prices. Oil price fluctuations continue to maintain inflationary pressures due to supply constraints and geopolitical events.
Bank of America stated that as the S&amp;P 500 Index entered a correction, the number of its clients flocking to the energy sector in mid-March surpassed that of any other sector; the bank's analysis showed that institutional investors were significant buyers, with the group recording the largest inflow of funds since the Silicon Valley Bank crisis.
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Looking ahead this year, driven by strong earnings, supply constraints, and ongoing inflationary pressures, the energy sector may maintain its growth momentum. An analyst from Seeking Alpha noted, &#34;Oil stocks seem finally ready to break out of a narrow trading range that has lasted for two and a half years. We believe the potential profit over the next two years is 50%.&#34;
In terms of segments, in the first quarter, the energy equipment and services sector rose 4.3%, while the oil, gas, and consumable fuels sector increased by 8.5%

In the first quarter of 2025, the SPDR Energy Select Sector ETF, which tracks the S&P 500 Energy Sector, rose by 7.8%, significantly outperforming the S&P 500 Index's decline of 4.4%. Despite a slight drop in oil prices, energy stocks attracted investors due to their inflation-resistant qualities, becoming defensive stocks. A report from Bank of America indicates that institutional investors have poured into the energy sector during the market correction, expecting the industry to maintain growth momentum amid strong earnings and ongoing inflationary pressures

- The SPDR Energy Select Sector ETF (XLE.US) surged 7.8% in Q1 2025, outperforming the S&P 500, which fell 4.4%.  
- Despite a slight decline in oil prices, the ETF includes companies from oil production, drilling, refining, and transportation, benefiting from strong earnings amid inflationary pressures.  
- Investor interest in energy stocks increased due to concerns over inflation and economic recession, with significant inflows noted from institutional investors following the Silicon Valley Bank crisis.

Zhitong

Bank of America

S&P 500

Concerns about stagflation trigger defensive attributes, energy stocks outperform the U.S. stock market in the first quarter, becoming the "best sector."