Commodities Markets Not So Frothy; Stocks Undervalued

``The energy sector never reached above a 20% weighting in the S&P 500 as the last three bubbles did, and did not experience the same decline in loss of S&P weighting. It’s not hard to understand why the sector did not give back much of its weighting in the S&P over the last year as one simply has to look at valuation levels. The sector reached a trailing PE ratio of 5.8 in March of this year, corresponding to an earnings yield (inverse of the PE ratio) of 17.24%, nearly seven fold greater than the 2.5% yield on the 10-yr UST at the time. Given its cheap valuations it’s hard to see the sector’s weight in the S&P 500 fall much further, particularly so when it is the most undervalued sector of all ten S&P sectors.''