The Markets Are Getting Defensive, So Keep An Eye The Utilities

The Markets Are Getting Defensive, So Keep An Eye The Utilities
December 19 05:16 2018

Sector rotation is an investment strategy involving the movement of money from one industry sector to another in an attempt to beat the market.  As industrial production falls, interest rates rise and the yield curve flattens and inverts, one sector of the stock market to keep an eye on is the utility sector.

I personally don’t think the utility sector is immune to a stock market crash, but this is one of a selective few in which the Smart Money will hide their money in.  Regardless of the market conditions, people need gas, water and electricity and will therefore have to pay for them.  In addition, most utilities are allowed to have somewhat monopolies for cost and efficiency reasons.  Lastly, as interest rates level off, the Smart Money will seek higher yields in the utilities and the cost to service debt goes down.

But the proof is in the pudding when comparing the SPDR sectors (utilities in pink, spy in red) to each other. 

Year To Date

Last Three Months

Last Month


As you can see, the only sector that have been positive over the last month has been the utilities.  Two of the top dividend yielding companies within the utility sector are PPL (PPL) with a 5.3% yield and Southern (SO), which yields 5.1%.

I’m not feeling PPL based on the trend line break.

The chart suggests SO would be the much better investment.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

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About Article Author


I'm a retail investor like most of you and learning everyday, but I have been educated and trained to identified the Smart Money on the charts to pick up whatever crumbs they leave behind.

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