Energy Sector Drives Leadership TrendsDecember 08, 2014
After today’s close, using our equal weighting methodology, the MSCI World Energy sector is in a technical bear market (down 20%). In the table below, we can see that as of Friday’s close, the MSCI World energy sector was down 19.07%.
MSCI World Sector Performance YTD
The latest drop in energy stocks continues the three year old trend of relative underperformance that began coincident to the turn in the USD in 2011. In the chart below, we compare the performance of the MSCI World energy sector to the MSCI All Country World Index USD.
The extreme under-performance of the energy sector has in turn driven the under-performance of resource heavy country indexes. The list of countries most impacted by the drop in the resource sector is pretty straightforward with one exception. It is quite logical to see the likes of Australia, Canada and Norway under-performing given how resource heavy these countries stock indexes are.
The developed country that has probably surprised many is the UK. Even though energy stocks are only 6.4% of the names in the MSCI UK index, British energy companies have been hit particularly hard. MSCI UK energy stocks are down almost 27% on average, dragging performance down to -2.49% YTD for the MSCI UK market as a whole.
MSCI UK Sector Performance YTD
The latest wave down in MSCI UK relative performance has the UK under-performing the MSCI All Country World Index by 17% over the last five years.
Of course the other side of the coin is that highly innovative sectors like health care or technology have radically outperformed. Below is a chart of the MSCI World technology sector compared to the MSCI World All Country index, showing how health care has outperformed by over 41% over the previous five years.
This sector performance has driven the huge outperformance of the MSCI USA index. As shown in the chart below, the MSCI USA index has outperformed the MSCI ACWI by 33% over the last five years.