The Decline and Fall of the Energy Sector

The stock market is up again today. This builds upon Friday’s gain and Thursday’s turnaround. The index is close to retaking its 50-day moving average. The current 50-DMA is 3,353.23. This morning, the S&P 500 has been as high as 3,350.14.

The decline of energy has been stunning. Here’s the S&P 500 Energy Index divided by the S&P 500. It hasn’t found a bottom.

If I stopped this chart in, say, 2017, then Energy would appear to be cheap.
But if someone had been waiting for this to “revert to the mean,” they would have gotten crushed.

Here’s the same chart, but the line is in red and it’s overlaid with the price of oil.

Posted by on September 28th, 2020 at 10:16 am


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