Materials(XLB) & Energy(XLE): Hope in Lagging vs. Gold, Silver, Copper?

Hey buddy, let me show you a "2025 Year-End Report Card":

So far in 2025, $SPDR Gold ETF(GLD)$ +57%, $iShares Silver Trust(SLV)$ +95%, $Global X Copper Miners ETF(COPX)$ +75%... while $Energy Select Sector SPDR Fund(XLE)$ is up a pitiful +3.2% , and $Materials Select Sector SPDR Fund(XLB)$ only +4.5%, like the kid at the bottom of the class.

But you know what?

In investing, the sweetest opportunities often hide in this kind of "lagging" performance!

And this time, even the big institutions are secretly writing "love letters" to energy stocks 💌

According to $Goldman Sachs(GS)$ Prime Brokerage data from October serving hedge funds, hedge funds massively increased net buying in commodity-sensitive sectors, with the net buying pace in $Materials Select Sector SPDR Fund(XLB)$ and $Energy Select Sector SPDR Fund(XLE)$ reaching the highest since February 2021. Prime Book data shows buying in these two sectors was almost entirely driven by long positions.

Except for developed Asian markets, $Materials Select Sector SPDR Fund(XLB)$ saw broad-based buying across nearly all regions, led by North America and Europe.

Additionally, net buying in metals & mining $SPDR S&P Metals & Mining ETF(XME)$ and chemicals exceeded net selling in $iShares U.S. Home Construction ETF(ITB)$ , indicating hedge funds are taking selective positions within the materials sector.

Buying in $Energy Select Sector SPDR Fund(XLE)$ was concentrated in North America. Oil, gas & consumable fuels $Spdr S&P Oil & Gas Exploration & Production Etf(XOP)$ , $VanEck Oil Services ETF(OIH)$ , and energy equipment $Global X MLP & Energy Infrastructure ETF(MLPX)$ , $SPDR S&P Oil & Gas Equipment & Services ETF(XES)$ all saw net buying, showing investors are deploying capital across the entire energy value chain rather than focusing on specific sub-sectors.

🎯⚠️ Hope isn't fantasy, it's based on three hard truths

Look how extreme market sentiment for $Energy Select Sector SPDR Fund(XLE)$ has become:

1. "Lagging" Because Market is Wrong on Direction

1. While the market obsesses over "EVs replacing ICEs," it forgets India and ASEAN bought a record 28 million motorcycles/cars in 2025, all running on fuel! Their demand increment = 4.8 million barrels/day! Environment? Food first.

2. $Goldman Sachs(GS)$ 2026 Outlook: India's crude demand growth will hit 1.2 million barrels/day in 2026, 1.8x 2025's level. EVs can't fill this gap.

2. "Lagging" Means Supply Side is Quietly Improving

• US shale companies got smart in 2025 - no new wells unless oil prices are high enough. Baker Hughes latest data shows active rig count fell to 575 in December, down 8% YoY, the lowest since 2021.

• Morgan Stanley 2026 Outlook: US shale oil production growth will drop below 0.5% in 2026, the lowest in a decade. Supply taps the brakes while demand keeps moving - isn't this the "demand exceeds supply" from middle school physics?

3. "Lagging" Gives You a "Value Valley"

• By end-2025, energy stocks have FCF yields of 9.5-11% vs 4% for tech. More strikingly, $Exxon Mobil(XOM)$ and $Chevron(CVX)$ have dividend yields (5.2%+) higher than the 10-year Treasury (4.3%)! Simply put: Energy stocks are like piggy banks paying 10% annual interest.

• $BlackRock(BLK)$ 2026 Allocation: In the dual context of "Trump 2.0 policy uncertainty + geopolitical risk," energy offers "natural hedge + rich cash flows" , making it their top overweight.

📚 A Historical Story + Institutional Intelligence

During the 2020 COVID crash, energy stocks got crushed - XLE fell from nearly $40 to $11. Buyers were laughed at back then.

Result? 2021-2022 saw XLE surge from $18 back to $47, a +200% gain! Those who bought "lagging" stocks profited most.

Energy didn't rally much in past two years, but in 2025 institutions are rewriting this story:

• Buffett's $Berkshire Hathaway(BRK.B)$ : Increased $Occidental(OXY)$ common shares consistently from 2022-2024, accumulating near oil cycle lows at ~$55-60/share. Buffett bought almost every quarter, reaching ~$14 billion by Q3 2024, treating OXY as the "energy version of See's Candy." This isn't speculation, it's a textbook case of "be greedy when others are fearful" .

• Bridgewater: Raised energy allocation from 2.1% to 4.7% in Q2 2024

• Goldman Target: Brent crude $95 average in 2026 (vs $80 now), implying 30% upside for energy stocks

History doesn't repeat, but it rhymes. Extreme sentiment divergence + institutional stealth accumulation often marks the start of mean reversion.

🎓 ETF Little Helper's Summary

Energy ETF hope = "Cheap + Tight Supply + Growing Demand" trifecta. Cheap is obvious, tight supply is happening, growing demand is the 2026 script.

The hardest part isn't the call, it's the wait. While watching gold/silver hit new highs daily, can you endure the solitude of your stagnant energy ETF?

🎮 How Different Personalities Play

Hothead 🔥:

• Tool: $VanEck Oil Services ETF(OIH)$ (Oil Services ETF), max elasticity

• Play: Buy in batches now, add on every 5% dip, bet on Q1 2026 inventory reversal

• Catalyst: OPEC+ may extend cuts in Jan 2026, Goldman sees >70% probability

Slowpoke 🍵:

• Tool: $Energy Select Sector SPDR Fund(XLE)$ (Energy Select ETF)

• Play: Wait! Enter only when Brent breaks $85, safer right-side trade

• Institutional Note: JPMorgan sees $85 as the key threshold for "reflation trade" activation

Balancer ⚖️:

• Tool: $Energy Select Sector SPDR Fund(XLE)$ + $SPDR Gold ETF(GLD)$ (Gold ETF) 50/50

• Logic: Gold up = market scared, scared = energy may dip; hedge both sides

• 2026 Allocation: BlackRock suggests 10% energy + 5% gold "hard asset combo"

⚠️ Risk Warnings (Must Read!)

• ETFs aren't safe: Energy ETFs can drop 30%, diversification ≠ safety

• Don't single-bet: Keep energy ≤15% of total portfolio

• Avoid leveraged ETFs: 2x/3x energy ETFs (like ERX) are gambling tools, not investing

• 2026 Black Swans: Trump policies, debt ceiling, geopolitical conflicts can disrupt

Final Words:

Investing is like grocery shopping - what everyone's grabbing (gold, silver) may be overpriced, while the unloved (energy) is on discount. But the real challenge: Do you dare to quietly add the "bargain" to your watchlist while others despise it?

Will you invest in $Energy Select Sector SPDR Fund(XLE)$

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