The Macro Brief: Lights Out For Utilities - When Do You Sell?

Where Macro Meet Markets

Utilities ($XLU) has been on a tear, as it should. Coming into 2022, we were overweight utilities, and it powered everyone’s portfolio and generating huge gains.

In “So Long 2021! What’s Poppin’ In Q1-22,” it was outlined”

“overweight low-beta/min. volatility, consumer staples and discretionary, utilities, healthcare.”

Utilities are up 7.24% YTD, 6.42% MTD and 1.42% over the last five days.

But, why are utilities so strong in a weak risk environment? The sector is defensive and utilities are “recession” proof; and given recent surges in energy prices, they can be rather profitable.

Moreover, a key driver of utilities is the yield curve. Utilities love a flat or descending yield curve.