A benchmark is typically a broad-based index of securities such as the S&P 500, MSCI World, or Russell 2000. ¹⁾

There are dozens of different measures, one for each variety of crude. The financial market focuses on two: Brent, and West Texas Intermediate, the grades traded in London and New York, respectively. They suggest a price hovering around $90 a barrel.

Commonly used benchmarks include the MSCI World, MSCI EAFE, S&P 500, Russell 2000, and MSCI Emerging Markets. The MSCI World is a market-capitalization weighted index designed to measure the equity market performance of developed markets (encompass- ing 23 developed markets, including the US). The MSCI EAFE is a market-capitalization weighted index that measures the equity market performance of developed markets excluding the US and Canada. The S&P 500 is a market capitalization weighted index that measures the equity market performance of a basket of 500 stocks that encompass the majority of the US equity universe. The Russell 2000 is a market-capitalization weighted index that measures the equity market performance of the small-cap segment of the US equity universe. Lastly, the MSCI Emerging Markets is a market-capitalization weighted index that measures the equity market performance of emerging markets (encompassing 25 emerging market countries). ²⁾

But the sector weights aren ’ t fixed and can change over time—due to performance differences, additions and deletions of firms to the indexes, and a variety of other factors. For example, Financials wasn ’ t always the biggest, and for many decades Industrials dominated. ³⁾

It’ s important to consider the regions as well, because in a top-down con- text, local economic and political conditions will have a large impact on sector, industry, and sub-industry performance. For example, if you expect the US will perform well overall in the near term, that bodes well for Oil & Gas Drilling and Oil & Gas Equipment & Services, where most of those companies are located. And how you expect Emerging Markets to perform overall should figure into your expecta- tions for Coal & Consumable Fuels. ⁴⁾

So why are they such a small percentage of the Russell 2000? Because IOCs are generally too large to appear in the small cap Russell 2000 index. ⁵⁾

It’ s also important to note many of the world ’ s most significant Integrated Oil & Gas companies are owned by foreign governments and therefore are neither publicly traded nor reflected in stock mar- ket indexes. For example, Saudi Aramco, Saudi Arabia ’ s National Oil Company, is the largest oil company in the world based on produc- tion and reserves, but it ’ s not represented in stock market indexes because it’ s entirely state-owned. ⁶⁾

Another US-heavy industry is Energy Equipment & Services, with major energy service firms like Schlumberger and Transocean contributing heavily to the industry ’ s weight. The industry is grow- ing outside the US but still remains a relatively small weight in most foreign benchmarks. ⁷⁾

Within Emerging Markets, there are virtually no Energy service fi rms. The Oil & Gas Refi ning & Marketing sub-industry is a relatively small weight in all benchmarks except Emerging Markets, where it ’ s the second-largest weight. Geographically, most of these firms reside in emerging markets or the US. ⁸⁾