XLE holds the energy sector of the S&P 500, mainly integrated oil and gas companies, exploration and production, refining and energy services. ExxonMobil and Chevron are the two largest holdings and together account for a large portion of the fund, so results depend heavily on these two companies. Oil and natural gas prices are the main driver of returns: the fund has typically risen when energy prices rise and fallen when they drop. Energy companies pay meaningful dividends and, since the 2014-2016 oil price downturn, have put more emphasis on capital discipline, buybacks and dividends than on production growth. The sector has often held up better when inflation is rising and has historically had a lower correlation to technology stocks than the broad market.
