“In bull markets that lack momentum (today), the right strategy is to buy oversold conditions, not chase strength. That often requires a controversial call, and one that may be at odds with recent data. Today that call is buying utilities (and bond surrogates), while fading/selling banks. The former is oversold, with spiking 65-day lows and negative volatility alerts suggesting tactical liquidation,” according to a Renaissance Macro Research note posted by Amey Stone of Barron’s.
The trailing 12-month PE ratio for utilities of 19.85 is now higher than that of the more volatile technology sector at 19.16.
Looking ahead, FactSet projects the utilities sector is expected to experience earnings growth of 4.4% in 2016. Consequently, analysts warned that the lofty prices may not be supported by robust earnings growth.
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Utilities Select Sector SPDR