Utilities can be a bull market asset too, you know!
People assume Utilities doing well is a heads-up that the stock market could be taking a turn for the worse.
But that’s not necessarily the case, at all.
Everybody’s wrong.
New All-time Highs
Utilities closed at another new all-time high last week.
But it didn’t just do it on a market-cap weighted basis, where the largest stocks in the sector drive all the returns…
Utilities closed at a new all-time high on an equally-weighted basis too:
This is the sector’s highest close in history.
The Invesco S&P 500 Equal Weight Utilities ETF (RSPU) gives each of the holdings in the sector the same weighting.
Keep in mind, the market-cap weighted version also made new highs, helped by top holdings such as NextEra Energy (NEE), Constellation Energy (CEG), Southern Company (SO), and Duke Energy (DUK).
But what really stands out to me is the equally weighted version. This is evidence of broad strength in the group.
Utilities: Bull Market Leaders
Utilities have been the market’s leading group since early 2024.
Think about how well stocks in general have done during this period.
Just to be clear, over the past 18 months, of all the sectors in the S&P 500, Utilities has been the best performer.
On a market-cap weighted basis, Utilities are up 43% vs 33% for the Nasdaq100 and 29% for the S&P 500.
On an equally weighted basis, Utilities are up 45% compared to gains of 20% for the S&P 500 and 16% for the Nasdaq100.
We’ve Seen This Before
I remember well during that bull market from 2003 to 2007: Utilities led the entire time.
Here’s a chart showing the S&P 500 overlaid with Utilities on a relative basis:
Both lines are going up, which is OK. It’s perfectly normal.
Utilities can be a market leader.
We do want to pay attention to Consumer Staples for signs of trouble coming.
When Consumer Staples stocks start to outperform, it’s likely evidence the market is becoming more defensive.
But don’t confuse Utilities with Consumer Staples.
There’s a big difference.
Investors often lump these groups together. But they’re wrong.
If you like the Utes, own the Utes.
Don’t avoid them just because it’s a bull market.
The only way to make sure you own the best stocks is to buy the best stocks.
Sometimes, the best stocks are Utilities.
This is one of those times.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs