Group “Drilling” Lower:
There may be “sure things” in the market place, but the performance of the energy group may be as close as one can get. Below we see a chart of the annual performance of the major S&P sectors dating back 13 years (from Novel Investor), and it is easy to see just how dismal energy has been. Five of the last six years it has finished last or second to last of the 11 groups, and for eight years running the XLE has underperformed the S&P 500. “Value” players in this space have been decimated. In recent years there have been some high profile closures of funds with T Boone Pickens, Blenheim Capital, Andy Hall’s Astenback Capital just to name a few. From crudes peak in 2008, a series of lower highs and lows has been in place, well before the US became the largest oil producer. This has had several some positive effects, as prices at the pump collapsed, but has sentiment become just way to depressed and a strong dead cat bounce could be in the cards? Let us remember trends once in place are more likely to remain that way, than to reverse, so bet on the bounce to be short lived. Even with the XLE’s near 4% jump Wednesday, it is still the worst acting major S&P sector YTD down almost 9%, and one of just 2 of the 11 groups in the red in 2020 thus far.