Investors that are experienced with the utilities sector and the related exchange traded funds, namely the Utilities Select Sector SPDR (NYSEArca: XLU), know at least two things about this group.
First, utilities stocks and ETFs are prized for being low beta, defensive, high-yielding income plays that are viewed as similar to bonds. Second, the trade-off when accessing those favorable traits is that the utilities sector is inversely correlated to rising interest rates. That is information worth remembering with another Federal Reserve meeting right around the corner.
However, there is some surprising data that indicates stocks and the utilities sector in particular, can perform admirably around Fed meetings.
“Going back to 2015, the SPX has averaged a 0.10% gain during Fed meeting weeks, according to data from Schaeffer’s Senior Quantitative Analyst Rocky White. Further, the S&P has ended Fed weeks higher 53% of the time. That’s just slightly beneath the index’s anytime weekly stats since 2015, with the SPX averaging a gain of 0.13%, with a positive rate of 55%,” according to Schaeffer’s Investment Research.