Equities have been on a tear in recent weeks, with the S&P 500 and Dow Jones Industrial Average both hitting record highs. But it’s not just the traditional growth stocks that have been driving the market higher. Another defensive sector, utilities, has also been outperforming the broader market.
Utilities are typically seen as a safe haven for investors, as they tend to pay out steady dividends and are less volatile than other sectors. This has been the case in recent weeks, as the Utilities Select Sector SPDR ETF (XLU) has gained more than 10% since the start of the year, compared to the S&P 500’s 6.5% gain.
The outperformance of utilities has been driven by a combination of factors. For one, the sector has benefited from the Federal Reserve’s dovish stance on interest rates, which has kept borrowing costs low. This has made it easier for utilities to finance their operations and invest in new projects.
At the same time, the sector has also been buoyed by the ongoing shift to renewable energy sources. Utilities are increasingly investing in renewable energy projects, which has helped to boost their profits and share prices.
Overall, the outperformance of utilities is a sign that the market is still in a “go” trend. Investors are still willing to take on risk, but they are also looking for defensive sectors that can provide some stability in uncertain times. Utilities have been one of the beneficiaries of this trend, and it looks like they will continue to outperform in the near future.