A few years back, when I was in Austin, Texas attending a music festival, I saw a pick-up truck with a bumper sticker that made me laugh: “Please God, give me one more oil boom. I promise not to blow it next time.”

I’m thinking about that slogan, as I write this article. The beaten-down energy sector, known for its extreme boom-bust cycles, is on the cusp of another boom. Perhaps this time, the industry won’t blow it (at least not too soon).

The energy sector has been one of the hardest hit this year. As the economy reeled from the coronavirus pandemic, energy demand and prices plunged. The shares of oil and gas companies have greatly underperformed the broader market.

However, economic growth is returning and many energy companies seem to have learned from the mistakes they made during the previous boom. To be sure, scores of energy firms have gone bankrupt because of overproduction and onerous debt. But the strongest have survived and they’re positioned to reap the rewards of a rebound in energy prices. Through mergers and acquisitions and cost efficiencies, many energy companies have repaired their balance sheets and gotten into leaner shape.

Positive news about COVID-19 vaccines and expectations that OPEC+ will soon extend existing production cuts are feeding bullish sentiment in the energy sector. This confluence of trends also is lifting the broader stock market, which often moves in tandem with the fortunes of the energy patch.

On Monday, the Dow Jones Industrial Average jumped 327.79 points (+1.12%), the S&P 500 climbed 20.05 points (+0.56%), and the NASDAQ Composite rose 25.66 points (+0.22%). Small caps hit record highs, a trend that should continue as economic growth gathers steam.

Investors also were cheered by the news Monday that President-elect Joe Biden had chosen former Federal Reserve chair Janet Yellen as Treasury Secretary. Yellen is widely respected by the financial establishment.

In pre-market futures trading Tuesday morning, stocks were set to soar at the open. Adding to the positive news is the waning of election uncertainty, with the Trump administration’s decision Monday to allow a Biden transition.

The incoming Biden administration is intent on implementing massive fiscal stimulus that will boost economic growth, which would lift energy demand and prices. Above-average inventories of crude oil are likely to diminish amid a global economic and oil demand recovery.

Even if Congress proves resistant to calls for stimulus, Biden plans a flurry of executive actions to assist the economy that don’t require congressional approval. Regardless, the growing consensus in Washington is that government assistance is required to prevent a “double-dip” recession.

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Signs that the economy will take off in early 2021 have prompted investors to rotate into cyclical sectors. Energy stocks have been a major beneficiary of this dynamic over the past few weeks. This rotation into economically sensitive, cyclical “value plays” should continue for the rest of 2020 and into 2021.

To be sure, crude oil and petroleum inventories in the U.S. hover above five-year average levels, but they’ve dropped from their peaks earlier this year, according to data from the U.S. Energy Information Administration (EIA).

What’s more, oil demand in Asia has significantly increased in recent weeks. Countries in the East, notably China, got an early handle on the pandemic and consequently are returning to economic growth faster than the West.

In its November Short-Term Energy Outlook, the EIA projects that in 2021, as global oil demand increases, per-barrel prices of West Texas Intermediate and Brent North Sea crude should reach $50 per barrel or above, as opposed to the mid-$40s where they currently hover (see chart).

For most energy companies to produce oil profitably, crude needs to trade at around $50/bbl. Current oil prices are a far cry from the negative price of -$37.63/bbl on April 20.

Wall Street interprets rising oil prices as a sign of economic vitality, and rightfully so. Oil is the most valuable commodity in the world and it powers modern industry. When the energy sector enters a bear market, it tends to drag the economy and financial markets down with it. The converse is true: a thriving energy sector is seen as a barometer of good economic and financial health.

It’s true that the energy sector is at an inflection point, as fossil fuels increasingly give way to renewable energy sources such as wind and solar. Big Oil will never regain the dominance it once enjoyed in the 20th century. But oil and gas will remain vital commodities into the foreseeable future.

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The energy sector right now is home to compelling value plays. Pandemic-panicked investors have abandoned quality energy stocks that now sell at bargain prices. As we approach a new year, sector rotation makes sense for your portfolio. Don’t give short shrift to energy.

The red metal is set to shine…

Another vital commodity that’s a gauge of economic health is copper. The “red metal” is a widely used commodity so sensitive to economic conditions, it’s viewed as a leading indicator.

Stimulus and a concomitant return to economic growth in early 2021 would be favorable for copper demand. The price of copper is poised to soar next year and beyond, which is great news for copper producers.

Copper is vital for building construction, power generation and transmission, electronics, industrial machinery, and transportation vehicles. Copper wiring and plumbing are mainstays of heating and cooling systems, appliances, and telecommunications links.

Next year, as the world economy resumes growth and infrastructure spending explodes, so will demand for copper. For our favorite investment play on this crucial commodity, click here now.

John Persinos is the editorial director of Investing Daily. You can reach John at: mailbag@investingdaily.com. To subscribe to his video channel, follow this link.