ETF Trends
ETF Trends

Utilities exchange traded funds were the worst-performing sector this week with the “risk-on” trade out in force to start 2012.

Utilities Select Sector SPDR (NYSEArca: XLU) and Vanguard Utilities (NYSEArca: VPU) were on track for losses of more than 3% this week despite the move higher in the S&P 500.

Conservative utilities funds were among the top U.S. industry-specific ETFs in 2011 with gains of nearly 20% while the S&P 500 added about 2% with dividends included.

This week’s selling may also have involved some investors pruning last year’s portfolio winners and locking in gains.

Utilities ETFs were in favor last year as equity investors put a premium on safety and dividends. Utilities Select Sector SPDR has a dividend yield of 3.9%. [Dividends Power Utilities ETFs in 2011]

In other evidence of the so-called risk-on trade this week, volatility-linked ETF tracking CBOE Volatility Index futures fell sharply along with the VIX.

Vanguard Utilities

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.