Utility stocks this year have mounted a rally unseen in more than two decades. In the third quarter, utilities are the best out of 11 sectors that comprise the S & P 500, climbing 18%. As a group, utilities are poised to score their largest quarterly gain since George W.
Bush was president in 2003. Year-to-date gains are even more substantial, at around 27%. If that holds through yearend, utilities will see their biggest annual advance since 2000, when they surged more than 50%.
"Utilities are the hottest sector in the market currently," Wolfe Research Rob Ginsberg said in a note to clients in August. That hasn't been the case in a generation. "When was the last time someone said that? It's been a while.
" XLU YTD mountain Utilities Select Sector SPDR, YTD The strong performance this year marks a turnaround for the power and light group. It finished both 2022 and 2023 in the red. There are a few reasons behind the unusual rally for the group.
Utilities are seen as outsized beneficiaries of lower interest rates, thanks to their above-average capital requirements and lofty dividend yields. And the Federal Reserve just embarked on what's likely to be a lengthy easing campaign. Plus, the group is also starting to get a look from growth investors looking to play the power generation needed for the great big artificial intelligence datacenter buildout.
September highs The Utilities Select Sector SPDR Fund (XLU) , an ETF tracking utilities in the S & P 500, hit multiple all-time high.