Markets are off to a challenging start for 2025. Yet some asset classes are faring better than others. The commodity space, which fared relatively well in some respects, continues to thrive.
For 2025, however, the early winner out of the gate has been the energy space. Oil prices have been pushing higher. That’s due to a combination of fears, including another round of sanctions against Russia. Further gains look likely in 2025.
Given the prospect for strong returns after poor performance in 2024, investors should consider upping their holdings to energy plays. It’s also likely to hold up if inflation continues to remain stubborn.
For an early-stage oil rally, larger energy companies should see some strength. Major integrated oil companies like Chevron (CVX) could deliver solid returns here. Shares closed 2024 slightly lower.
But at current prices, Chevron trades at a reasonable value, and shares pay a hefty 4.2% dividend, offering solid income now and the prospect for further gains if oil continues to push higher this year.
Action to take: Investors may want to build a position now, and use any market pullbacks to add to that position. If oil prices continue higher, investors may also want to look at smaller and more speculative energy plays.
For traders, the June $165 calls, last trading for about $5.30, could see mid-double-digit returns from a continued rally in the first half of the year. If oil prices spike higher on a news-driven event, traders can take quick profits.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.