Crude Oil Saved the S&P

Written by: | April 20, 2018

Source: Bloomberg, April 19, 2018 Past performance is no guarantee of future results. Indexes are unmanaged, and not available for direct investment. Index returns do not include fees or sales charges. This information is provided for illustrative purposes only and does not reflect the performance of an actual investment.

 

  • Crude oil prices are on a tear. Powered by OPEC’s recent discipline in holding to its self-imposed production quotas, as well as by this year’s tensions on trade, Brent Crude is now trading at $73.58 per barrel (bbl) as of Friday,[1] up nearly $12 from its February 13 low.[2]
  • Yet over that same period, the S&P Energy Sector Index dropped about -1.9%, versus -1.1% for the S&P 500.
  • The picture is quite different for the past month. Equities took notice of the tightened supply and rising prices; the S&P 500 Energy Sector rose 7.4%, while the S&P 500 fell -0.7%.
  • A telling measure of energy’s influence on the S&P 500: minus energy, the S&P 500 fell 2.5% for the month. That‘s despite the energy index comprising slightly over 6% of the S&P 500 overall.
  • Compare that to the Info Tech sector, now 25% of the S&P 500, and which fell about -1.1% over the same month.
  • Bottom line: though only time can tell if the trend will continue, energy saved the index from the weakness in tech for the period.
  • The difference in impact by sector demonstrates the potential influence of portfolio decisions on investment results – as well as the potential influence of actively managing sector positioning within a larger stock portfolio.

 


[1] Source: Bloomberg, April 20, 2018, 7:40 AM EDT

[2] West Texas Intermediate (WTI) is about $5.50 lower, at $67.89,

The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S. Indexes are unmanaged, and not available for direct investment. Index returns do not include fees or sales charges.

The S&P 500 Energy Index comprises those companies included in the S&P 500 that are classified as members of the Global Industry Classification Standard (GICS) energy sector.

The S&P 500 Energy Info Tech Index comprises those companies included in the S&P 500 that are classified as members of the Global Industry Classification Standard (GICS) information Technology sector.

West Texas Intermediate (WTI), also known as Texas light sweet, is a grade of crude oil used as a benchmark in oil pricing. This grade is described as light because of its relatively low density, and sweet because of its low sulfur content. It is the underlying commodity of Chicago Mercantile Exchange's oil futures contracts.

 

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