Energy ETFs: Worse Before It Gets Better

The Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy exchange traded fund, and rival energy ETFs are getting blasted this month as energy careens toward being 2018’s worst-performing sector.

After getting pounded on Monday, XLE is off 13.62% this month and its fourth-quarter loss has swelled to over 25%.

Earlier this month, the energy sector experienced a short-lived rally after lengthy Organization of the Petroleum Exporting Countries (OPEC) discussions finally came to a conclusion, resulting in a larger-than-expected production cut that sent oil prices higher

OPEC and associated partners agreed to cut 1.2 million barrels per day with OPEC being responsible for 800,000 barrels. The latest production cut came as a surprise to many oil analysts as initial estimates were slated at 1 million barrels per day and 650,000 barrels per day for OPEC.

“ founder Todd Gordon says years of underperformance in the XLE energy ETF against the S&P 500 have made the sector susceptible to greater swings to the downside,” reports CNBC.

Can History Repeat?

Previous oil bear markets also weighed on broad equity benchmarks, but when the broader market recovered, the energy sector joined in.