The utilities sector is more immune to market conditions than other sectors. These companies are mostly government regulated and only susceptible to changing energy prices, but will always be in need. They present high dividend yields and investors flock to these companies during downturns due to their safety. Utilities are currently out-performing the S&P 500 by a significant amount, and U.S. utilities are out-performing global utilities as well. Low interest rates will continue to drive the performance of the utilities sector.
However, there is a large concern that SMIF missed the boat over the summer and utilities prices are already inflated. Thus, we will remain neutral with the S&P 500 sector weightings for the current period.
Access the full report here: Fall 2011 Utilities Sector Report