Gold, bonds and other defensive assets are prime options to get defensive in today’s market, but one area to consider is utility-focused exchange-traded funds (ETFs).
“Just think about it: a utility is going to do better during a recession. They can pass on those rates to the clients that they serve, or, during good times, it’s also going to do well,” said Steve Grasso, managing director of institutional trading at Stuart Frankel. “So, I think that they are safety bets. I do think that they can extend their gains for the year.”
The rest of 2019 could see a continued shift towards the utilities sector, and as such, here are a pair of ETFs to consider, especially in today’s volatility–the First Trust Utilities AlphaDEX ETF (NYSEArca: FXU) and the JHancock Multifactor Utilities ETF (NYSEArca: JHMU).
FXU seeks investment results that correspond generally to the price and yield (before the fund’s fees and expenses) of an equity index called the StrataQuant® Utilities Index. The fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the index.
The index is a modified equal-dollar weighted index designed by IDI to objectively identify and select stocks from the Russell 1000® Index in the utilities sector that may generate positive alpha relative to traditional passive-style indices through the use of the AlphaDEX® selection methodology.
JHMU seeks to provide investment results that closely correspond to the performance of the John Hancock Dimensional Utilities Index (the index). The fund normally invests at least 80% of its net assets (plus any borrowings for investment purposes) in securities that compose the fund’s benchmark index.
The index is designed to comprise securities in the utilities sector within the U.S. Universe whose market capitalizations are larger than that of the 1001st largest U.S. company at the time of reconstitution.
Lastly, for investors looking to trade with leverage, there’s the Direxion Daily Utilities Bull 3X Shares (NYSEArca: UTSL). UTSL seeks daily investment results equal to 300% of the daily performance of the Utilities Select Sector Index.
The fund invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments, such as swap agreements, and securities of the index, ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index. The index includes domestic companies from the utilities sector which includes the following industries: electric utilities; multi-utilities; water utilities and etc.
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