For example, take a look at these utility index funds: VPU XLU IDU FUTY I haven’t looked at their composition or weights, but I’d imagine they’re similar. Regardless, they all went down hard at the end of September. Worst since COVID 2020… what gives?
Do the utility ETFs got any Magnificent 7 stocks in them? Magnificent 7 stocks are the new defensive plays.
It’s always about interest rates, isn’t it? “Why is the sky blue?” —Interest rates! “Which came first, the chicken or the egg?” —Interest rates came before both of them. “To be, or not to be… that is the question.” —No matter, the answer is interest rates.
XLU chart looks like its bottomed. It doesn't do down any more. It was up 1% today. 3.6% yield doesn't seem that useful in this environment so you have to believe the utilities can raise their rates to do well. If you want yield you can get 8-12% on leveraged loans or even BBB CLOs. Just like the telecom industry it relies heavily on borrowing tons of money which means they are screwed.