A look at energy sector performance for the first half of 2014
After a remarkable 2013, the energy sector continues to be one of the strongest sectors in the first half of 2014, propelling both the US and Canadian market to new highs.
The TSX gained 11% in the first 6 months of 2014. All sectors we up across the board, but commodity stocks outperformed all other sectors. Energy was the best performing sector, gaining an impressive 25% for the year. This is in addition to the 13% gain achieved in 2013.
The more broadly based US market was a little more balanced. The S&P500 gained 6% for the first 6 months in 2014. Again, all sectors were up for the year, with energy and utilities leading the pack. The US energy sector gained 14% in first 6 months of 2014. Although US energy stocks lagged their Canadian counterparts for the first half of the year, US stocks had a stellar 2013, gaining almost 24% last year.
Oddly enough, Utilities were the best performing stocks in the US, gaining almost 17% for the year-to-date. This is due to the higher yields offered by Utility stocks, offering better much returns than fixed income.
Ironically, energy stocks tend to peak at the end of a bull market cycle, but Utilities do well at the beginning of a bull market. This diversion in the market is caused by the extraordinarily low interest rates being offered by central banks around the world. Historically, low interest rates and high commodity prices never occur at the same time. Stock market technicians are therefore struggling to predict where we are on the economic cycle and whether this bull market is nearing its end or just gaining steam for the next leg up.