Conservative Utility Stocks Lose Favor

Last week we told you how dwindling stock market volatility (NYSEARCA:VIXY) and the insatiable appetite for high risk debt (NYSEARCA:JNK) is characterizing the market’s latest episode of fearless risk taking. This time around, there’s another piece of evidence that confirms this scary trend.

The chart below shows how S&P 500 utilities (NYSEARCA:XLU) are on the verge of cracking below their 200-day moving average. This signals that conservative utility stocks are losing favor among stock market participants.

Utilities (NYSEARCA:IDU) are a defensive industry sector sought by conservative investors for their steady dividends and minimal volatility (NYSEARCA:SPLV). XLU is already trading below its 50-day moving average and a break below the 200-day moving average could be next.

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Utilities (NYSEARCA:VPU) were among our top ETF picks in 2014. The sector gained around 28% and easily outperformed major stock benchmarks (NYSEARCA:IVV). Along the way, investors bagged a dividend yield near 3% to add to their gains.

While falling interest rates last year was great for utilities, 2015 has been a very different story. Utilities are now the worst performing S&P 500 sector and have lost almost 5% year-to-date. But the worst may not be over.

XLU 3.3.15

If the stock market’s ecstasy with aggressive risk taking remains, it could mean further losses ahead for conservative industry sectors like utilities.

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