The S&P 500 Energy sector ETF (XLE) tried to break out of its downtrend in late 2019, but the bounce has been completely erased as of today with it plunging to new 52-week lows.  Talk about an ugly chart.  Start a two-week free trial to Bespoke Institutional to access our Bespoke Report, Chart Scanner, custom portfolios, and much more.

Remarkably, the Energy sector now has a weighting in the S&P 500 with a 3-handle – 3.97% to be exact.  That’s less than 50 basis points larger than the Utilities sector, and less than 1.5 percentage points away from being the smallest sector in the entire index (which currently belongs to Materials at 2.52%).

Only twelve years ago, the Energy sector was less than 0.70 percentage points away from being the largest sector in the S&P 500.  In mid-2008, the Energy sector’s weighting peaked at 15.96%, which was 67 basis points below Tech’s weighting of 16.63% at the time.  Below is a long-term chart of the Energy sector’s weighting in the S&P 500 since 1990.  The red line shows its average weighting of 9.03% over this time period.  At current levels, Energy’s weighting is more than 50% below its historical average and easily at its lowest level of the last 30 years.

Below is a 10-year performance comparison of the S&P 500 Energy sector (XLE) versus the S&P 500 (SPY).  As shown, XLE is now down 1.84% in price over the last ten years, while SPY is up 195.1%.

Below is a chart of XLE going back further to 1999 when the ETF began trading.  From 1998 through mid-2008, the Energy sector was one of the best sectors to be in.  It fell with everything else during the Financial Crisis and then managed to recover all of its losses and make new highs in 2014.  It’s really only the last five years where the bottom has fallen out, especially relative to the rest of the stock market.

If we compare the price change of XLE to SPY since 1999, SPY has actually only recently overtaken the Energy sector in terms of performance.  XLE is up 137% since the start of 1999 while SPY is up 169%.  Just over five years ago, XLE was up more than 300% since 1999 versus SPY’s gain of 65%.

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