The recent bull move in the major market equity indices that has been present during the last few sessions with the exception of yesterday’s reversal to the downside, has been characterized by interesting relative outperformance in the Utilities sector.
In the past one month period, SPDR Utilities (NYSEArca: XLU) has rallied 2.39% versus the S&P 500 down 3.02% during the same time frame.
However, this relative outperformance has only recently been evident, as the S&P 500 is up 4.74% year to date versus XLU up 2.25%. [Utilities ETFs Lead on Stability, Dividends]
In fact, Utilities are flirting with multi-year highs and actually briefly traded at a new high yesterday before giving back some ground later in the day, while broad based equity indices such as the S&P 500 are clearly very far from recent, or multi-year highs.
Some market observers see this out-performance, in a sector that is historically considered as “defensive” and “stodgy” in terms of it typically yielding an attractive dividend and being a lower beta to the overall market, as a sign that portfolio managers should still be in defensive mode and prepared for more market gyrations and potential weakness in days and weeks to come.
XLU continues to attract assets as returns have been appealing of late, as the fund has seen more than $200 million enter the ETF in recent sessions.
Currently, top holdings of XLU are SO, EXC, D, NEE, and DUK, and we would expect greater than average activity in related Utilities sector ETFs that deliver different index methodologies outside of XLU as well.
Specifically, portfolio managers should also keep an eye on VPU (Vanguard Utilities), IDU (iShares DJ U.S. Utilities Sector), FXU (First Trust Utilities AlphaDEX), RYU (Guggenheim S&P 500 Equal Weight Utilities), PUI (PowerShares Dynamic Utilities), PSCU (PowerShares S&P Small Cap Utilities), and FUI (FocusShares Morningstar Utilities).
Year to date, XLU has logged the second best performance from a returns standpoint, up 2.25%, while PUI has rallied 2.89%. The other returns in the space are as follows: FUI +1.48%, RU +1.30%, IDU +1.14%, and FXU -3.27%. Meanwhile, the Small Cap focused PSCU has fallen 2.55% YTD.
SPDR Utilities
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