XLE Set for Price Breakout with 5% Total Return Since May.

XLE has a total return of +5% since May, including its dividend. The energy sector is not officially covered by the author, but XLE is still primed for a breakout.

The energy sector, represented by the XLE ETF, has shown resilience, posting a total return of +5% since May, including its dividend. This performance is notable amidst a backdrop of geopolitical tensions and economic uncertainty. The sector's recent strength can be attributed to several factors, including the ongoing energy transition and the potential for higher commodity prices.

The Federal Reserve's dovish stance has been a significant driver for the energy sector. Traders see an 84% chance of a Fed rate cut in September, as indicated by Fed funds futures [1]. This expectation is driven by weak jobs data and more dovish comments from Fed Chair Jerome Powell. The yield curve has steepened, with the two-year note yield (US2YT=RR) falling to an almost four-month low, and the 10-year note yield (US10Y) reaching its lowest point since August 14 [1]. This indicates that investors are pricing in more rate cuts, which could provide a tailwind for the energy sector.

However, not all energy companies are performing equally. Excelerate Energy, Inc. (NYSE:EE), a provider of liquefied natural gas (LNG) solutions, has a Return on Invested Capital (ROIC) of 5.21% and a Weighted Average Cost of Capital (WACC) of 7.28%, indicating it is not generating returns above its cost of capital [2]. This suggests that Excelerate Energy may need to improve its capital efficiency to enhance shareholder value. In contrast, Black Hills Corporation (BKH) showcases the highest efficiency with a ROIC to WACC ratio of 0.91, suggesting better capital utilization [2].

The energy sector's performance is also influenced by geopolitical factors. Recent challenges in the UK market, highlighted by the FTSE 100's decline due to weak trade data from China, have led investors to seek stability through dividend stocks [3]. Top dividend stocks in the UK, such as Clarkson PLC, Morgan Sindall Group plc, and Wilmington plc, have shown resilience and have increased their dividends despite volatile earnings [3].

In conclusion, while the energy sector has shown resilience, not all companies are equally positioned to benefit from the current market conditions. The sector's performance is influenced by a combination of factors, including the Federal Reserve's dovish stance, geopolitical tensions, and the ongoing energy transition. Investors should carefully evaluate individual companies' financial performance and capital efficiency before making investment decisions.

References:
[1] Reuters. "Two-year yields lowest since May as traders price in rate cuts." [URL](https://www.tradingview.com/news/reuters.com,2025:newsml_L1N3UJ0J7:0-two-year-yields-lowest-since-may-as-traders-price-in-rate-cuts/)
[2] Financial Modeling Prep. "Excelerate Energy, Inc. (NYSE:EE) Financial Performance Analysis." [URL](https://site.financialmodelingprep.com/market-news/excelerate-energy-financial-performance-sector-comparison)
[3] Simply Wall St. "3 UK Dividend Stocks to Watch Amidst Market Volatility." [URL](https://finance.yahoo.com/news/3-uk-dividend-stocks-3-064026621.html)