Utilities stocks and utilities ETFs rallied over the past week as trade war concerns and a return to safety helped support this defensive play.
Over the past week, iShares Edge MSCI Multifactor Utilities ETF (Bats: UTLF) gained 3.9%, John Hancock Multifactor Utilities ETF (NYSEArca: JHMU) rose 3.2%, Reaves Utilities ETF (NYSEArca: UTES) added 3.2% and Invesco DWA Utilities Momentum Portfolio (NYSEArca: PUI) increased 3.0% The Utilities Select Sector SPDR (NYSEArca: XLU), the largest utilities related ETF, was 2.5% higher over the same period.
In the equities space, utilities have traditionally acted as a safe sector bet and have been seen as a reliable source of income.
For instance, Morgan Stanley analyst Michael Wilson argued that it’s a great time for investors to go defensive with utilities stocks, Benzinga reported.
Morgan Stanley Upgrades Utilities Sector
Morgan Stanley has upgraded the utilities sector to Outperform, arguing that stock prices aren’t keeping pace with earnings growth so far in 2018, which suggests the market participants may be subtly pricing in slowing earnings growth down the line.
“Last year, this ‘risk on’ performance ranking would have seemed natural to us given the extremely strong and broad performance of global equities, but we think this pattern continuing for the duration of 2018 seems unlikely,” Wilson said.