Best energy ETF for a Trump presidency: Will XLE shine amidst pro-oil policies?

With Donald Trump signaling a return to aggressive oil policies, investors are eyeing the best energy ETF to capitalize on potential gains.

Trump’s track record as a staunch supporter of the oil and gas sector is well-known, and his recent comments, including a vow to “Drill, Baby, Drill” if re-elected, have reaffirmed his commitment to expanding oil production.

During his first presidency, Trump’s pro-oil stance led to a notable surge in oil and gas production. Now, as he campaigns for a potential return to the White House, the question for investors is clear: Which energy ETF stands to benefit the most from a renewed Trump administration?

One standout option is The Energy Select Sector SPDR® Fund ETF (NYSEARCA:XLE).

This low-cost ETF has seen impressive returns, climbing over 300% since the pandemic’s lows.

XLE includes top dividend-paying stocks within the energy sector, making it a compelling choice for investors looking to capitalize on Trump’s pro-oil agenda.

Trump administration’s interest in oil production

The Trump administration’s emphasis on energy independence including deregulated drilling and relaxing environmental restrictions does not go unnoticed.

In fact, if Trump comes to power, the stocks to avoid the most are environment related stocks.

Anthony Termini, an experienced investor, says “In May 2024, Donald Trump told a group of oil industry executives that he would expand drilling in the Gulf of Mexico and that he would reverse the restrictions on drilling in the Alaskan Arctic.”

“These will be major boons to the oil and gas industry and support an investment thesis focused on drilling.”

Termini isn’t the sole vower of a huge oil and gas exploration potential under a second Trump presidency. It is clear from the fear among environment activists and Electric Vehicle companies that they know Trump means what he says.

Is XLE the Trump ETF?

Since geopolitical uncertainty and supply and demand imbalances influence the performance of energy stocks, Yahoo Finance’s stats wizard Jared Blikre, indicates that while Trump was in office, the S&P 500 Energy Select ETF (XLE) dropped 56% as a consequence of a dip in oil demand during the pandemic.

On the other hand, XLE soared a whopping 218% as Biden ascended to power. The profits of major companies surged as Russia’s invasion of Ukraine resulted in skyrocketed crude futures.

Matt Stephani, President at Cavanal Hill Investment Management, states that costs for companies might decline under a Trump presidency, possibly boosting the profitability of oil companies. More earnings means more dividends – a result XLE will directly benefit from.

XLE contains the top dividend paying energy stocks. From Exxon Mobil (XOM), Chevron (CVX), and Warren Buffett-backed Occidental Petroleum (OXY), to prominent midstream companies like Williams Companies (WMB), ONEOK (OKE), and Marathon Petroleum (MPC), not only offering relatively low risks, but also comparatively high returns.

The ETF seems a good choice to capitalize on the current free cash flow boom in the energy sector.

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