2018 Ends with Energy Sector in Last Place in the S&P 500

One cannot minimize the impact of the overall year-end market decline on energy sector stocks, which went down along with every other sector. For example, Apple’s market cap declined from $1.1 trillion in June to $750 billion at the end of the year. That loss alone is more than the current market cap of ExxonMobil, the largest U.S. oil and gas producer.

But here we are taking a look at the full year of 2018, including where the impact of the market downturn ends and where instead oil and gas sector fundamentals explain the sector’s poor investment performance.

The bottom line: for the second straight year, the stock performance of the energy sector was at or near the bottom of the S&P 500 – and in 2018, it was solidly in last place.

In early 2017 and 2018, the industry buzz had oil and gas primed for a comeback. The oil price rise, which started in early 2016, sent Brent crude oil prices from $29 per barrel in January 2016 to a peak of $85 per barrel in January 2018. And the chatter was that it was going to reach $100 soon thereafter.

During this oil price run-up, it looked like the energy sector would show overall improvement. Integrated oil and gas companies posted cash gains and many quarterly profit reports topped estimates. If you invested $1,000 in ExxonMobil on March 28 and sold it on October 9, you walked away with a $131 gain.

No lift from rising oil prices.

But October brought an early frost in the oil market and the Brent limped off at $54 per barrel at the end of the year. So if instead you had invested $1,000 in ExxonMobil on January 1 and held it the whole year, you were looking at a $200 loss.  Even at its high point, ExxonMobil never meaningfully surpassed the S&P 500, although the industry index as a whole did so for part of the year.

To read the full analysis, click here.

Deb McNamara