Energy And Materials Keep Underperforming S&P Sectors
Tiho Brkan | Aug 04, 2015 04:13AM ET
The majority of investors remember the great stock market peak in March 2000, however what investors fail to remember is that S&P 500 predominately fell due to the overvaluations in the technology sector (NYSE:XLK). Other sectors didn’t perform all that poorly, mainly trading sideways until the great bull market started in March 2003.
Moreover, during 2007, while whole stock market peaked out, the sell off was lead by the financial sector (ARCA:XLF). Later on in 2008, as commodities crashed, so too did energy (ARCA:XLE) and material sectors (ARCA:XLB).
Today, we have yet another fascinating situation with sector divergence. The energy sector continues to make 52-week new lows, and together with the materials sector, remains negative over the last 12-months (the only two sectors to do so). On the other hand, staples (ARCA:XLP), discretionary (ARCA:XLY), financials, healthcare (ARCA:XLV) and technology keep marching higher.
The energy sector now accounts for only 7% of S&P 500’s overall weighting; a far cry from its glory days in early 2008 at around 16%. Market participants should not forget that it was around this time that crude oil (NYSE:OIL) prices traded near $150 per barrel, while today, one barrel fetches $45. After all, industrial producers are closely linked to the raw material prices (NYSE:RJI) and the global supply / demand fundamentals.
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