Editor's note: Today, the newest analyst at our corporate affiliate Chaikin Analytics joins us to highlight one trend you need to watch out for.
Briton Hill's career started at Fidelity Investments... where he was one of the youngest traders in the company's history. Later, he co-founded a wealth-management firm and was soon managing more than $150 million... in less than three years. His hedge fund returned an impressive 9.3% last year, beating the S&P 500 Index by nearly 30 percentage points.
The warning that Brit is sharing today is bad news for consumers. But it could drive big gains in one group of stocks you might not have considered...
This winter, Americans enjoyed a reprieve at the pump...
Gasoline prices surged last summer. The national average eclipsed $5 per gallon in June for the first time ever.
But the average price plunged to around $3.10 per gallon by December. That's a nearly 40% drop in about six months.
Don't expect the relief to last, though. In fact... it's already reversing.
You see, starting in late 2021, the U.S. government dipped into its strategic oil reserves to push down gas prices. It hoped to help Americans make ends meet as inflation remained a threat.
It worked. But now, we're about to face the consequences...
Oil reserves are now at their lowest levels in nearly 40 years. And that's leading to serious consequences for Americans and the energy industry as a whole.
First, look at this chart of the U.S. Strategic Petroleum Reserve...
It's clear that the U.S. government dramatically drained our reserves to keep prices down. Now, it has no choice but to replenish them.
The government started this process in December. And since then, gas prices are already up 11%.
As I said, the average price of regular gasoline was roughly $3.10 per gallon in mid-December. Today, the average price is around $3.40 per gallon.
This trend likely won't change any time soon, either...
Spring is here. Oil demand typically peaks in the summer. Peaking demand means higher prices – especially with reduced supply. And don't forget the political instability in oil-rich countries like Russia.
To make matters worse, the U.S. won't be able to dip into its reserves like it did last year.
So you might want to keep some extra cash as the weather gets warmer. If you're planning to do a lot of driving this summer, it could be more expensive than you think.
But this shift will likely create a big opportunity for oil and gas companies...
So far, the current administration has made life difficult for domestic oil producers. But even the strictest policies can reverse course if times get too desperate...
It happened recently when China caved to COVID-19 protesters and reopened for business. And if gas prices surge high enough this summer, the U.S. government could give in, too.
The U.S. government could provide relief for U.S. oil prices and replenish its oil reserves at the same time with one simple move... bringing back domestic oil production.
Specifically, I'm talking about reopening closed pipelines and refineries.
Given the circumstances, this move seems inevitable. Without more domestic production, the prices at the pump will soar this summer. And the government knows it.
With that in mind, we should keep our eyes on oil and gas "picks and shovels" companies.
These companies build pipelines and supply refining equipment. And their businesses will soar if the government allows more domestic production to drive down gas prices.
Today, the Power Gauge is watching this potential opportunity...
At Chaikin Analytics, we use the Power Gauge to zero in on the most important details for an investment's performance. It's a set of tools that combines 20 factors into a simple rating: bullish, bearish, or neutral.
Our system rates the SPDR S&P Oil & Gas Equipment & Services Fund (XES) as "neutral+" today. Despite some recent technical weakness, the Power Gauge detects "very bullish" factors in the fund's favor. Three of its holdings are rated "bullish" or better. And none are "bearish" or worse.
These companies will thrive if the U.S. government ramps up domestic oil production again. And given the dire situation with our reserves, it's likely only a matter of time.
So keep these companies in mind during the months ahead.
Good investing,
Briton Hill
Editor's note: Last night, Brit sat down with Chaikin Analytics founder Marc Chaikin to release an important warning – because a rare signal just flashed in the markets...
Over the past 73 years, this indicator has only triggered 18 times before. And when it does, it's a major predictor of where stocks will go next. That's why you need to know what it's saying now...
Marc and Brit walked through all the details in last night's event, including why this indicator is specifically designed to generate "asymmetric results." They even shared the ONE trade they're urging folks to make right now. But if you missed the event, don't worry... You can watch the replay here for free.
Further Reading
"After consistently falling oil prices, traders are betting the downward move will continue," Brett Eversole writes. The speculators are piling in on the bearish side of this trade. But history shows that kind of pessimism could mean a rally is on the way... Read more here.
"With the Power Gauge at our side, we can pinpoint major shifts – like a run on the banks," Marc says. This tool from Chaikin Analytics was able to warn about the recent banking crisis months in advance... Get the full story here.
