On top of higher interest rates, utilities are always faced with the specter of government regulation and then there is the fact that when energy commodities fall in price, utilities stocks do not benefit the same way that, say, airlines do.
“People who sacrificed growth to get an extra point or two of yield gave up 60 or 70 points over the last 4 or 5 years in relative performance. There’s no reason to think that relative performance is going to improve in 2014,” Kotok told Breakout.
Making the utilities situation all the more concerning is that investors will pay up for the privilege of being involved. The sector’s current 12-month forward P/E of around 15 is above its five- and 10-year averages.
That is to say XLU is pricier than the Financial Select Sector SDPR (NYSEArca: XLF) and the Energy Select Sector SPDR (NYSEArca: XLE), just to name two.
Utilities Select Sector SPDR
