Energy ranked supreme as advisors speculated on the ETF theme that will top the ranks in popularity this year.

31.3% of advisors surveyed expect energy to be the dominant theme of 2022, trailed by disruptive technology, blockchain/DeFi, and then crypto, according to “ETFs 2022.” (Date: Jan. 5, 2022. Sample size: 2,039 respondents, 8.4% RIAs.)

The same survey respondents cited inflation, rising interest rates, and supply chain disruptions as their largest concerns affecting the performance of their investments over the next 12 months.

Shares of U.S. energy companies are seeing high prices in the first two weeks of the year, driven by increased demand toward sectors that are resilient to inflation. The energy sector started heating up in 2021, seeing the biggest gains of any sector in the S&P 500 last year.

The rotation toward energy in times of rising inflation is a time-tested strategy. The energy sector is less sensitive to inflation and rising interest rates than other income sectors. Energy stocks beat inflation 71% of the time within a time span of 1973–2020 and delivered an annual real return of 9.0% per year on average, according to Zacks.

Equities that pay dividends are typically better-positioned in an inflationary environment than the broader equity market or fixed income investments; the energy sector ranks first in average dividend yield, according to ETF Database

The relative stability of dividend income can help drive a higher total return. The total return for income-oriented indexes has often outperformed the broader market during high inflation years, according to Alerian.

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