Utility funds might weather the next rate scare, Morningstar says

Morningstar’s Robert Goldsborough thinks utilities are unlikely repeat their mid-2013 swoon, asserting that investors now are pricing in 4% U.S. Treasury yields, which would suggest no substantial downward moves in utilities if rates hit that level; utilitiy companies also could continue their recent outperformance if Treasury rates stabilized close to 3%.

On the other hand, Brendan Conway of Barron's sees this as reason for caution in the long run; if the climate of falling rates since 2000 is one of the drivers of utilities’ tremendous decade-plus performance, then the end of that climate would seem to bode ill for ETFs such as VPU and XLU.


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  • Jhalgren
    , contributor
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    It seems much too early to speculate that owning XLU would "bode ill" for it since we don't know how jobs will perform for July, August et al. That will prove whether or not we are out of the woods--don't think we will be; thus, utilities are still a sure bet for the short term--meaning now through next August or maybe even later. We'll see; meanwhile, seems like XLU is a good buy and hold for the interim crises.
    11 Jul 2014, 03:40 PM Reply Like
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