As news of social unrest in Iraq has saturated the American media, investors have become a little jittery. The S&P 500 broke its uptrend and ended the weak 0.6 percent lower. Meanwhile, the price of oil rallied 4 percent on supply concerns. Safe haven assets also rallied, with gold rising nearly 2 percent and long-term Treasury Bonds rallying 0.5 percent.
Given the potential for a conflict in the Middle East, I think investors should prepare their portfolios accordingly. When doing so, investors should not forget that there is also geopolitical tension between the U. S. and Russia, and this only bolsters the case for owning the following funds.
When buying these funds, investors should keep in mind that they have all performed well this week, and therefore it is prudent to wait for a pullback.
1. The iShares Oil and Gas Exploration and Production ETF (NYSEARCA:XOP)
Iraq is not a major global oil producer but this week we saw the price of oil soar, and with it we saw a rise in the shares of oil exploration and production companies. The XOP has been a phenomenal performer year-to-date, having risen over 17 percent as the price of oil has spiked over 10 percent. While investors may first look towards the more popular SPDR Energy ETF (NYSEARCA:XLE), the XOP is more geared towards companies that are leveraged to the price of oil. It also doesn’t include any coal companies that have been underperforming for the year. This fund closed on Friday at an all time high to the penny, and therefore, I think investors need to be cautious and wait for a pullback of 3-4 percent.