Will Utilities Sector ETFs Protect You Against A Sustained Bear Market Caused By Inflation?

Summary

• The Utilities Sector, represented by VPU and XLU, has held up far better than the S&P 500 and other popular Dividend ETFs.
• Backtesting shows XLU outperformed the S&P 500 throughout the 2001-2011 "Lost Decade."
• Inflation was not a factor in the 2000s, but now poses a huge threat to Dividend stocks in most other sectors while Utilities have a certain amount of protection.
• However, a Utility Fund doesn't appear to have been an optimum investment in the inflationary 1973-1981 period. And Utility ETF's current yields are far lower now than they were then.

Bilanol

When I first started investing in the late 1980s utilities were considered to be optimum income investments: safe "widows and orphans" income generators that could be relied on to provide income in good times and bad. ETFs indexing the Utility Sector have lived

Analyst’s Disclosure:I/we have a beneficial long position in the shares of VPU either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I will keep holding my investment in VPU as it has a low cost basis and large gains in a taxable account. I would not invest new money into it. I am not a registered investment advisor. I am just an ordinary investor with a lot of curiosity who enjoys researching stocks and sharing what I find with others. Don't buy or sell any security you read about here before doing your own research and considering opposing views.