However, the sector is susceptible to interest rate risk. The falling interest rate has helped utilities stocks outperform other equity sectors, but the trend could reverse once the Federal Reserve hikes rates.
“If rates rise, our analysts expect flat returns for utilities and underperformance relative to other U.S. equity sectors,” according to Morningstar analyst Robert Goldsborough.
Utilities Select Sector SPDR
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Max Chen contributed to this article.