If asked at any point in the past several years what the best-performing investment on Wall Street is, the answers would probably include tech, growth stocks, the "Magnificent Seven," or maybe even Bitcoin (BTC 1.11%).
The environment has changed in 2026. All of those categories are in the red so far this year (as of Feb. 4). The S&P 500 (^GSPC 1.23%) isn't doing much better, but there are now a number of different sectors performing significantly better than the index. This is a big change from what we've seen in recent years.
Cyclicals and certain defensive sectors have done especially well this year. Materials stocks have come roaring back and are up 14% this year. Industrials are up about 9%. Even the long-forgotten consumer staples group has gained nearly 12%.
But none of them have done as well as energy stocks. The Vanguard Energy ETF (VDE +1.55%) is up an impressive 16% so far in 2026.
VDE Total Return Price data by YCharts
There are a few factors that have gone into this.
In general, investors aren't demonstrating quite the same risk appetite as they have in the past. OPEC+ is still keeping a tight control on global oil production levels. But geopolitical tensions seem to be the big driver here.
NYSEMKT: VDE
Key Data Points
Tariffs and trade frictions threaten to disrupt the global supply chain dynamic. As countries become more protective, especially in the energy space, prices tend to drift higher. That tends to be bad for consumers, but good for oil companies because they can sell their product at higher prices. The tendency for energy stocks to go higher during periods of geopolitical risk is common. I think that's what we're seeing here.
