Utility stocks were among the worst-performing sectors of the market earlier this year, but they’re making a roaring comeback.
The utilities-tracking XLU ETF has risen in 13 of the last 14 trading sessions, jumping 10 percent in one month alone. Gina Sanchez, CEO of Chantico Global, told CNBC’s “Trading Nation” on Friday that the run is likely to continue as investors retreat into more stable sectors. Here are her reasons why.
• Utilities had taken a backseat to more growth-oriented stocks like technology amid broad economic expansion and the prospect of higher interest rates that could theoretically depress utilities’ prices. Now, as the market is turning more defensive and a U.S.-China trade tiff has come into focus, utilities look more attractive.
• Utilities typically pay substantial dividend yields; the XLU carries a yield of 3.3 percent, and some names within the group pay out even heftier dividends relative to the market.
• The group tends to have more reliable fundamentals than high-growth stocks, and many utility names are domestic plays that could withstand international trade tensions.
Bottom line: Utility stocks are rallying in recent weeks, and the trend is likely to continue.
As global growth slows, one unloved sector is getting lots of love