Utility ETFs down hard… why?

[kmiklas]

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?

 

[SunTrader]

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?

Rates up, utils down.

High capex. Also need to raise yield to compete with higher bond yields.

 

[Sergio123]

Do the utility ETFs got any Magnificent 7 stocks in them?

Magnificent 7 stocks are the new defensive plays.

 

[qwerty11]

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?

Just look at what's happening with NEE and you have your answer...

 

[DaveV]

When interest rates go up, utility stocks are less appealing.

 

[kmiklas]

Rates up, utils down.

High capex. Also need to raise yield to compete with higher bond yields.

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.

 

[nitrene]

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.

 

[kmiklas]

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.

Where can I get BBB CLO at that rate? I checked Fidelity but only junk are paying that.

 

[R1234]

this is a long term chart of Consolidated Edison. Look what it did during the 1970's inflation

 

[kmiklas]

this is a long term chart of Consolidated Edison. Look what it did during the 1970's inflation
View attachment 324865

Omg thanks for sharing this!