How a boring sector became the ‘hottest’ trade on Wall Street

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How a boring sector became the ‘hottest’ trade on Wall Street

Wolfe Research knows its excitement around utilities is unusual. “Utilities are the hottest sector in the market currently,” Rob Ginsberg, the firm’s managing director, wrote in an email to clients on Thursday. “When was the last time someone said that? It’s been a while.” Despite sliding in Thursday’s session, the Utilities Select Sector SPDR (XLU) fund is still around 6% over the past month. It is also higher by about 10% on the quarter and more than 18% for 2024. On top of that, Ginsberg pointed to the fact that the fund sat near a 23-month high as reason for excitement. XLU YTD mountain The Utilities Select Sector SPDR Fund (XLU), year to date Investors have been pouring in over recent months, according to fund flow data compiled by Ginsberg. In fact, he said net weekly inflows have been positive for 14 of the past 16 weeks. Looking under the hood, Ginsberg said there is strength in the sector, which includes names such as PG & E and NextEra . More than 4 out of every 5 stocks in the S & P 1500 utilities sector are in an “uptrend” using Wolfe’s model. However, Ginsberg listed NRG Energy and Southwest Gas Holdings as two of the handful of members that investors should avoid. The newly found excitement around a traditionally boring sector comes as market volatility spikes. Earlier this month, the S & P 500 had its worst day since 2022 as a series of economic data stoked fears of an incoming U.S. recession. Since then, however, equity markets have rebounded, with the broad market index back within striking distance of record levels seen last month.

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