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No sector is as negatively correlated to rising interest rates as utilities, meaning the longer the Fed resists raising interest rates, the longer high-yielding utilities stocks and ETFs remain compelling destinations for yield-starved investors.
“If the central bank takes a hawkish tone with its forecast, it could potentially undermine the typically bullish momentum for utilities stocks in the Fed-meeting aftermath. That’s because higher rates will increase the companies’ borrowing costs, and also reduce the appeal of the traditionally attractive dividend yields in the utilities sector,” reports Schaeffer’s.
For more information on defensive ETFs, visit our defensive ETF category.