Energy (XLE) returns dropped recently due to profit taking. Crude oil prices are currently at their highest level since 2008. The US Energy Information Association (EIA) predicted that oil markets will continue to tighten over the next two years due to slow growth from non-OPEC countries.  Due to these events we expect the drawdown in global petroleum stocks and an increase in production demand from the OPEC countries, another reason for reducing crude oil production is the recent Libya and Middle East conflict which will disrupt the crude oil supply globally. We are expecting good growth in the energy sector as the total demand of oil grows by an annual average of 1.5 million bbl/d in 2011 and 2012.

 

We believe IYZ will continue to grow slowly this year. Economists and portfolio managers are moving towards technology with demands for new products as well as telecommunications providers with dividends and earnings growth. The returns are not impressive although steady in nature. Worldwide the demand of technology and telecommunication related products are gaining popularity making this sector interesting.

 

XLV prospects appear bright as there is a surge as the population ages and healthcare expects to double by 2018.

 

XLF still remain down while the things gradually improve: XLF growth is expected to be meager in 2011 but the things will improve in 2012 – 13.      

Assets Class	Symbols	05/06 Trend Score	04/29 Trend Score	Direction
Telecom	IYZ	11.63%	10.44%	^
Healthcare	XLV	10.93%	10.5%	^
Industries	XLI	9.92%	11.4%	v
Energy	XLE	9.47%	17.92%	v
Consumer Discretionary	XLY	9.37%	9.76%	v
Consumer Staples	XLP	8.43%	8.95%	v
Utilities	XLU	7.14%	6.48%	^
Materials	XLB	6.91%	10.93%	v
Technology	XLK	6.08%	6.94%	v
Financial	XLF	1.08%	3.51%	v

The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).

 

Trend Rankings: The trend table ranks each of the ten U.S. industrial iShares ETFs and the score is based on the following formula: for an ETF or index, we use the average of 1, 4, 13, 26 and 52 week total returns (i.e. dividend and distribution reinvested). Notice the average of the total returns would overweight the recent price movement. This is similar to exponential moving average.

 

One concern: The recovery of the economy will face challenges in upcoming months as they battle huge debt. S&P recently showed concern revising US credit rating. The current administration is making plans to cut the deficit which may lead to austerity programs that could affect the overall momentum of these sectors.

 

Symbols:  XLY, IYZ, XLI, XLB, XLK, XLE, XLF, XLP, XLU, XLV

Disclosure:

MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.