FFI Perspectives

Observing Energy ETF Performance in a Market Pull-Back

Were you watching the performance of energy securities during February’s market pull-back? We were. The movements were interesting. For expediency, let’s take a look at the performance of a couple of ETFs that represent the clean energy (QCLN) and oil and gas (XLE) sectors. The performance of SPY (the SPDR S&P 500 ETF) is shown as a reference for the broader US stock market.[1]

Security

Closing Price,
2/1/2018

Closing Price,
2/9/2018

% Loss

SPY (SPDR S&P 500 ETF)

281.58

261.5

-7.13%

QCLN (First Trust NASDAQ
Clean Edge Green EngyETF)

20.61

18.87

-8.44%

XLE (Energy Select
Sector SPDR

75.62

66.67

-11.84%

 

Note that the QLCN (-8.44%) held up better than the XLE (-11.84%), the oil and gas ETF, and that it held up fairly well relative to the SPY (-7.13%).

What does this mean for the state of energy investing overall? We can’t put too much stock (pardon the pun) into performance during such a brief pull-back. However, it’s worth considering that this is a small sign of the maturing of clean energy investments. It’s also interesting to note that during the financial crisis of 2008, the relative performance of the QCLN and XLE showed something quite different:

Security

Closing Price,
1/1/2008

Closing Price,
12/31/2008

% Loss

SPY (SPDR S&P 500 ETF)

111.45

74.98

-32.72%

QCLN (First Trust
NASDAQ Clean Edge Green EngyETF)

22.66

10.76

-52.52%

XLE (Energy Select
Sector SPDR

56.35

39.22

-30.4%

 

The XLE (-30.4%) fared better than the SPY (-32.72%) over the course of 2008, and the QCLN (-52.52%) saw a much sharper decline, losing more than half its value.

Ten years have passed since the financial crisis, and clean energy is better understood. There is no way to predict the performance of a protracted bear market from observing the past couple of weeks. But what we’ve seen may be a sign that the maturity of the market will allow clean energy to show more resiliency versus oil and gas during the next pull-back.

[1] All price data in this post is from https://finance.yahoo.com/.

 

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