There is perhaps no sector which exemplifies ‘risk-off’ more than Utilities. No sector has more consistent earnings, thanks to business which are highly regulated and rely heavily on long-term contracts. The Utilities also tend to pay large, stable dividends. These characteristics make them attractive places for investors to hide during economic turbulence (real or imagined).
Unsurprisingly, the sector outperformed during 2022, when US stocks were in the midst of their first extended bear market in more than a decade. The Utes were actually setting new all-time highs back in September, while the rest of the market was still drifting downward toward the ultimate lows in October.
The sector has been left behind since then, though. This week, the group dropped to its lowest level of the year, breaking a key level of support that’s been in place since 2021.