The energy sector has pulled off a rare feat: It’s the only industry group in the S&P 500 Index to rise in the month of March.
Driven by investors looking for a natural hedge against tariff-driven inflation, the S&P 500 Energy Index has climbed 4.1% in March, clobbering the broader equity market, which is down 6.9% over the same period. The gains have also beat the 1% advance in oil prices, primarily on the potential for more sanctions and tariffs on Russia after a volatile month.
“People are getting more concerned about inflation as these tariffs start to have a more meaningful impact,” said Stacey Morris, head of energy research at VettaFi.
US President Donald Trump’s tariff policies could push already sticky inflation even higher. Long-term inflation expectations have jumped to a 32-year high, the latest University of Michigan survey showed.
Morris said what is surprising in the current backdrop is that energy stocks are outperforming oil prices, which have languished despite increasing inflation. Oil got a boost Monday after Trump threatened to impose secondary tariffs on Russia’s oil exports if Vladimir Putin refuses to agree to a ceasefire with Ukraine.
The last time energy was the top-performing market sector was three years ago. That rally lasted over the course of 2022, when rising inflation pushed the Federal Reserve to ratchet up interest rates. At that time, Russia’s invasion of Ukraine also sent crude oil prices soaring above $100-a-barrel, further exacerbating inflation concerns. Then most recently, energy stocks outpaced the broader market a year ago for the month of March when oil also rose.
