The energy sector is well-positioned to end 2022 with the same strength it started with as more nations look to wean themselves off energy dependence on Russia. This could open doors for the Invesco S&P SmallCap Energy ETF (PSCE).
The U.S., in particular, could rise as a dominant force in the energy sector, especially if it re-establishes itself as a top-tier oil and gas provider once again. The move towards energy independence could open up avenues for revenue through partnerships with other nations for oil and gas.
Russia’s invasion of Ukraine has only accelerated this notion. As Western sanctions rained down heavily on Russia, so did the scramble for energy independence and seeking alternative sources.
“Russia’s invasion of Ukraine has triggered plans by many oil and natural gas importing countries to curtail Russian imports and transition to what may be perceived as more reliable, less unsavory sources of supply while accelerating their transitions to green energy – opening the door for the U.S. to re-emerge as the world’s dominant oil and gas provider,” a Seeking Alpha article by PIMCO explains.
Small-Caps, Big Performance
Both during market downtrends and upturns, small-caps can be sensitive to the broad index. The S&P 500 Energy Sector Index is up 45% for the year, while PSCE is up close to 60%.
PSCE seeks to track the investment results of the S&P SmallCap 600® Capped Energy Index. The fund generally will invest at least 90% of its total assets in the securities of small-capitalization U.S. energy companies that comprise the underlying index.
These companies are principally engaged in the business of producing, distributing, or servicing energy-related products, including oil and gas exploration and production, refining, oil services, and pipelines. The fund’s expense ratio comes in at 0.29%, which is a relative bargain given its category average of 0.47%.
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