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Quarter-End Insights

Energy Remains the Most Undervalued Sector

We expect a nearly complete recovery in crude demand as the pandemic subsides in 2021.

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Following positive coronavirus vaccine trial reports and regulatory approvals in the fourth quarter, the Morningstar US Energy Index rose an impressive 29% in the fourth quarter, outpacing the overall market. Year to date, the outsize impact of the pandemic on crude-oil demand and prices has contributed to a 33% fall in the index versus a 19% return for the market. As initial inoculations continue to be carried out, renewed confidence in a pickup of global crude consumption in 2021 will be a major driver of performance in the first quarter. Energy remains the most undervalued sector, trading at a 22% discount compared with a 6% premium for the overall market.


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Dave Meats does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.