What XLE’s Past Dips Say About This One

The energy fund’s history of bouncing back from pullbacks is encouraging, but the ride down has often gotten worse before it gets better.

Of the 24 times the State Street Energy Select Sector SPDR ETF (XLE) has fallen this much since 2005, 19 were followed by a positive return over the next year. With the fund now sitting about 13.9% below its 52-week high, you’re likely wondering if this is another one of those times, a gift for the patient, or a trap for the hopeful.

A fund’s character is revealed in its dips. A broad, diversified fund often snaps back toward the market average. A concentrated, single-theme fund can stay down for years. XLE’s own record is mixed, offering reasons for both optimism and caution.

When This Dip Paid, How Well Did It Pay?

The encouraging part of the record is straightforward. In the 19 instances where the fund recovered within a year, the median return was a solid +20%. The median peak gain within that year was even better at +24%. This wasn’t a slow grind, but it wasn’t an immediate bounce either; it took a median of about 289 days to hit that peak. You can see this pattern in recent history, with similar dips occurring in May 2025, September 2024, and January 2024. But history is never a straight line. The full range of outcomes across all 24 dips ran from a one-year loss of 31% on the low end to a gain of +61% on the high end.

The Price Of Entry Was Often More Downside

Here’s the catch. Buying the dip rarely meant buying at the absolute bottom. Before the recovery began, investors who bought into a dip like this one had to endure more pain first. The median worst further drawdown was 7%. That’s the extra decline a buyer typically had to sit through before the fund found its footing. For anyone watching their account balance, seeing a new purchase immediately fall by another 7% can test their resolve.

A Fund Built On Just A Few Giants

Ultimately, whether this dip recovers depends entirely on what’s inside the basket. And XLE’s basket is anything but diversified. The fund holds just 21 positions, and it is heavily concentrated at the top. The five largest holdings make up 55% of the entire fund, with giants like Exxon Mobil (XOM) and Chevron (CVX) alone accounting for a significant share. Its ten largest holdings make up 75.2% of the fund. This isn’t a broad bet on the economy; it’s a focused position on a handful of the world’s largest energy companies.

This concentration is the engine behind both the strong rebounds and the steep drawdowns. The fund’s fate rests on the shoulders of a few key players. XLE’s history shows that buying a dip has paid off more often than not, but it has never been a smooth or guaranteed ride. The decision rests on whether you believe this small group of energy titans is poised for another run, and whether you can stomach the potential for another 7% drop on the way there.

Should You Be Buying This Dip?

Staring at the dip in XLE, you are weighing whether to buy more or wait it out. The history above is an honest place to start. We know what you are thinking, and it is an absolutely fair question.

Still, a dip-and-recovery record is only half the story. It tells you what tended to happen after past drops, not whether the fund is reasonably valued today or how it is holding up against its peers right now. Before adding to a position, it is worth seeing where it actually stands: our ETF Valuation and Performance Scorecard lines the major ETFs up side by side on valuation, returns, and risk, so the dip becomes one input rather than the whole decision.

What A Dip Chart Cannot Tell You?

There is also a limit that no dip chart can fix. An index fund has to hold whatever its index dictates, so a buyer can end up with money concentrated in a handful of the same names, whether or not they would have chosen them. Buying the dip does not change what is inside the basket.

If you would rather your exposure be chosen than inherited, our High Quality (HQ) Portfolio is built on a different idea: rule-based, multi-factor screening instead of index membership, with 30 names spread deliberately across different kinds of businesses and re-balanced on a schedule so it leans into quality while trimming what has run. It has a record of outpacing a benchmark that combines the three major indices – the S&P 500, S&P Mid-cap, and Russell 2000.