Inflation is at an all-time high. We think that it might be sensible to place your money on ETFs in the energy sector. This is because they are known to do well in inflationary environments. Energy Select Sector SPDR Fund (XLE), Vanguard Energy ETF (NYSE:) (VDE), SPDR S&P Oil & Gas Exploration & Production ETF (XOP), and iShares U.S. Energy ETF (IYE) are currently rated A (Strong Buy) in our proprietary rating system and could be smart additions to one’s portfolio now. So, let’s discuss.The stock market remains volatile, and consumer price data is indicating significantly higher-than-expected inflation. In October, the Consumer Price Index climbed 6.2% from last year to reach its highest annual rise in nearly 31 years. While equities perform poorly in inflationary environments, certain sectors like energy can shine during them.

Inflation has been beaten 71% of times by the energy sector, delivering an average annual real return of 9.9%. This is primarily because energy-focused companies’ revenues are tied to energy prices, a key inflation component. Energy companies will see higher profits and revenues if they have lower energy prices.

So, as energy prices continue to climb, we think it could be wise to invest in quality energy ETFs—Energy Select Sector SPDR Fund (XLE), Vanguard Energy ETF (VDE), SPDR S&P Oil & Gas Exploration & Production ETF (XOP), and iShares U.S. Energy ETF (IYE). The ETFs are rated A (Strong buy) in our POWR Ratings.

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