Oil Price Decline Hits Funds
Energy-related sector funds aren't the only ones taking a hit.
This article was originally published as a blog post sent to Morningstar FundInvestor subscribers earlier today. Download a complimentary copy of FundInvestor here.
The sell-off in oil gained pace this week as oil prices fell below $40 a barrel. That's good news for businesses where oil is a big expense or that depend on customers driving to their stores. However, it's obviously bad news for commodities funds, energy funds, and really any fund that owns shares of natural-resources stocks.
Let's take a look at the hardest-hit groups. Through Tuesday, here are year-to-date category returns:
Equity Energy: -26%
Equity Precious Metals: -23%
Commodities Broad Basket: -23%
Natural Resources: -22%
Diversified Emerging Markets: -13%
Utilities: -12%
Emerging Markets Bond: -5%
Small Value: -5%
High-Yield Bond: -3%
It's not pretty, that's for sure. High yield will be worth watching as a fair amount of high-yield debt comes from the natural-resources sector. If oil prices stay depressed, that will put greater pressure on energy company debt.
Among diversified equity funds,
United States