Energy has also been the top-performing sector over the Fed’s last seven tightening cycles.
The energy sector has been an attractive play from a so-called mean-reservation perspective – the idea that prices and returns eventually move back towards the mean or average. Now that the energy sector has experienced a large pullback, traders are anticipating the sector will at the very least revert back to its historical average.
Oil companies have announced cuts to spending budgets and some have diminished share buybacks in response to a 60% plunge in oil prices since the June high. Oil’s woes have not prevented investors from embracing XLE. The ETF has pulled in $900.2 million in new assets this year.
Energy Select Sector SPDR
