We are on the cusp of this same situation now, but at this time it is in the commodity sector, most particularly in oil-related stocks. At the moment, the price of oil is hovering around $45 per barrel, which translates into 0.4% of the world's oil production is unprofitable. However, should oil continue its price declines, more production will turn unprofitable, which will spark the need for oil producers to suspend production. In turn, the suspension of production will only service to support oil prices.
Another reason that makes oil-related investments a good option is oil service companies is cutting exploration project budgets. Most recently, Royal Dutch Shell announced that they will be cutting their 2015-2017 operating budget by $15 billion dollars. Conoco, another oil producer, pledged $11.5 billion budget cut to their capital expenditures. What does this mean? This is just taking long term supply out of the market, which only increases "reward" for those who are holding oil service investments at the moment.
When oil prices were higher, ISIS battled to capture oil fields and produce oil that would be sold on the black market. While we don't have evidence of this, one must think about the possibility that the activity of ISIS has empowered oil traders to take a negative stance, which will be reversed once
Many are enjoying the lowest gasoline prices they have seen for some time, but those who are financially savvy enough will invest in oil-related stocks. A great place to start is XLE, which is low cost method to purchase a basket of oil-related stocks.