Page 18 - Leisure Living

A Look Back At The Energy Sector
By Christopher McIntire, President, McIntire Retirement Services www.mcintireretirementservices.com
It’s been quite a ride for our domestic energy sector over the last year, to say the least! Crude oil has fallen from roughly $105 a barrel to around $45 before rebounding a bit too nearly $60 a barrel as I type this article.
For investors in the big oil companies it’s also been a rough ride. The ETF fund for Energy (IYE) is off roughly 18.50% over the last year according to Yahoo Finance. Many investors in this type of fund are in it for the dividend and somewhat security of these companies as the world’s thirst for oil con- tinues to grow...until last year when China was slowing their consumption, which led to a surplus of oil. Also fueling (I couldn’t resist) the oil surplus is the domestic production here in the US from fracking and other means. Large oil companies laid off workers around the globe and cut spending to combat the collapse of oil prices. Domestic pro-
duction slowed greatly as profits plummeted and the boom towns of North Dakota and similar areas slowed significantly.
The forecast for oil prices is to fall throughout the summer once again which can be a boom for us at the gas pump; however, for investors in the typically dividend rich energy sector, it may be time to look elsewhere for your dividend checks and growth of your money for a while.
The high yield bond market also struggled in 2014 as the energy sector depends on the high yield bond market to finance their operations and capital spending needs. With a more than 50% drop in oil prices the default risk in this asset class increased significantly and investors pulled their money from this sector driving the bond prices down.
What does all this mean? I’m a boater like many of you so it is great to pay less to enjoy our hobbies and go on vacations while driving America’s interstates or navigating the great lakes. That means more money for restaurants and longer stays at hotels. Cheaper airline flights shouldn’t be too far behind either. For investors in energy, it may be another tough year for growth and dividends in this asset
class.
Investment advice is offered by Horter Investment Management, LLC, a Registered Investment Adviser. Insurance and annuity products are sold sepa- rately through McIntire Retirement Services, LLC. Securities transactions for Horter Investment Management clients are placed through Pershing Advisor Solutions, Trust Company of America, Jefferson National Monument Advisor, Fidelity, Security Benefit Life, FC Stone and Wells Fargo Bank, N.A.
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18 |LeisureLiving June 2015
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