Like IYR and TLT, XLU is trading around important multi-year resistance and how markets decide to treat utilities stocks in the coming weeks could also be a signal regarding investors’ bets on the Federal Reserve’s next move.
Entering 2014, XLU looked vulnerable to declines, at least based on the utilities sector’s frothy valuations. At the start of the year, XLU had a price-to-earnings ratio of 18.8 and a price-to-book of 1.8, according to Morningstar data. In comparison, the S&P 500 index has a 18.0 P/E and a 2.5 P/B. [Utilities ETFs Look Expensive]
Investors have not shied away from utilities ETFs simply because of elevated valuations. The ETF has added $312.4 million in new assets this year and to this point in Thursday’s session, four of the 20 ETFs that have made all-time highs are utilities funds, including XLU.
Chart Courtesy: Kimble Charting Solutions