Most investors view utilities as a reliable, income-generating asset that exhibit some bond-like characteristics. As interest rates declined, the sector appealed to many income investors for its relatively higher yields.

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“While utilities are trading at elevated valuations, this is in part justified by low U.S. Treasury yields, Goldman’s analyst notes,” according to Bloomberg.

Utilities sector fundamentals remain strong. However, utilities have been underforming due to the sector’s inverse relationship to rising interest rates – when rates rise or investors fear higher rates, utilities typically underpeform, and vice versa.

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Utilities Select Sector SPDR