While consumers may enjoy the additional purchasing power provided by a decline in energy prices, Energy sector investors would prefer that they had a little more pain at the pump.
The Energy sector of the S&P 500 is having a year to forget. The index is down 20% year to date on a total return basis (through 12/7/2015) and faces continued headwinds as oil prices remain stubbornly low. (The S&P GSCI Energy sector is down 37% year to date.) Due to its recent struggles, the market capitalization of the S&P 500 Energy sector is down over $350 billion since the end of 2014.
Poor performance in the Energy sector is having a material impact on the return of the S&P 500. Year to date, the S&P 500 is up 2.89%, while the S&P 500 ex Energy is up 4.95% (both on a total return basis).
Declines in the Energy sector have occurred across capitalization ranges. In fact, when compared to the performance of small-cap Energy, the S&P 500 Energy Sector performance seems almost muted.
There is little time left in 2015 for the sector to make a recovery. So far, all it has fueled is a race to the bottom.