For a few sectors rising interest rates are sort of a death sentence. These higher-yielding sectors, whether due to their underlying businesses or tax structures, generally have an inverse relationship with interest rates. That’s because rising rates signal the ability to get higher yields in “safer” bonds. And the list of these stocks – from REITs to MLPs – is pretty long. And that includes bread-and-butter utility stocks.
Except, utilities haven’t exactly been behaving like normal.
In fact, the sector has been on fire since the Fed has started its rate hikes. That’s not normal. And in reality, it could be highlighting something a bit more sinister.