- Energy producers accounted for $1.9 trillion, or 11%, of the S&P 500’s $17.4 trillion market cap in June 2014
- Since then crude oil futures have plunged 65%, dragging down the energy sector
- Consequently, the link between energy stocks and the broader equities market has diminished
After the selloff in crude oil and producers for over a year, exchange traded fund investors with a diversified broad market investment may be underweight the energy sector.
At their peak in June 2014, energy producers accounted for $1.9 trillion, or 11%, of the S&P 500’s $17.4 trillion market cap, reports Ben Eisen for the Wall Street Journal.
Since June 2014, crude oil futures have plunged 65%, dragging down the energy sector. As of the end of last week energy companies only made up $1.2 trillion, or 6.8%, of the S&P 500 benchmark.
“The longer it falls in price, the less impact it has on the overall market,” Sam Stovall, U.S. equity strategist at S&P Global Market Intelligence, told the Wall Street Journal.
For instance, the SPDR S&P 500 ETF (NYSEArca: SPY) includes a 6.86% tilt toward the energy sector, with only a 1.93% position in Exxon Mobil (NYSE: XOM) among its top 10 holdings.
Consequently, the link between energy stocks and the broader equities market has diminished. Stovall calculated that the energy sector has a monthly correlation of 0.9 with oil prices between 1990 and the present while the broader market’s correlation with oil prices is 0.6.