Energy Stock Divergence
The energy sector has been weak all year, and is now down about 17% year-to-date. As one would expect, energy stocks generally move with the underlying price in oil. Recently, this relationship has diverged. Since June, oil has recovered from $42 to $48 a barrel. Meanwhile, energy stocks have continued to fall to new lows. To me, this reflects a somewhat bearish sentiment in these stocks as investors have given up on them and pursued other opportunities. The lower prices have, of course, driven up dividend yields. Exxon Mobil, for example, is now paying a 4% dividend yield, which is at the high end of its 20-year range. Divergences like this usually correct themselves, so it will be interesting to see how this plays out. WATCH: Time To Buy Energy Stocks?