A long enough career as an observer of the markets will teach many lessons; one lesson that comes up time and again is that cycles exist within the market (all markets). Sometimes the cycles make sense event to superficial examination, and sometimes they do not.
The above chart shows the 12 month return on price for the Energy Select Sector SPDR ETF, an exchange traded fund that tracks a portfolio of companies in the energy business (Exxon, Chevron, Schlumberger, etc). It has been a tough 12 months. For contrast, the performance for ETFs tracking the S&P 500 and Dow Jones Industrial Average (SPY & DIA, respectively) was +13.12% and +10.45% as of this writing.
Why are energy companies suffering? An answer in one chart:
The 12 month move in the price of oil is a bit dramatic. It should be apparent that, at least in the short term, the market for energy itself is having a depressing effect on companies that produce and deliver energy.
David R Wattenbarger, president of DRW Financial
DRW Financial is a registered investment advisory (RIA) and is registered in the states of Tennessee, Illinois, and Georgia.
INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES PRODUCT, SERVICE, OR INVESTMENT STRATEGY. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER, TAX PROFESSIONAL, OR ATTORNEY BEFORE IMPLEMENTING ANY STRATEGY OR RECOMMENDATION DISCUSSED HEREIN.