Conservative Utility Stocks Lose Favor

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Last week we told you how dwindling stock market volatility (NYSEARCA:VIXY) and the insatiable appetite for high risk debt (NYSEARCA:JNK) is characterizing the market’s latest episode of fearless risk taking. This time around, there’s another piece of evidence that confirms this scary trend.

The chart below shows how S&P 500 utilities (NYSEARCA:XLU) are on the verge of cracking below their 200-day moving average. This signals that conservative utility stocks are losing favor among stock market participants.

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Utilities (NYSEARCA:IDU) are a defensive industry sector sought by conservative investors for their steady dividends and minimal volatility (NYSEARCA:SPLV). XLU is already trading below its 50-day moving average and a break below the 200-day moving average could be next.

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Utilities (NYSEARCA:VPU) were among our top ETF picks in 2014. The sector gained around 28% and easily outperformed major stock benchmarks (NYSEARCA:IVV). Along the way, investors bagged a dividend yield near 3% to add to their gains.

While falling interest rates last year was great for utilities, 2015 has been a very different story. Utilities are now the worst performing S&P 500 sector and have lost almost 5% year-to-date. But the worst may not be over.

If the stock market’s ecstasy with aggressive risk taking remains, it could mean further losses ahead for conservative industry sectors like utilities.

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