Utilities, Real Estate and Consumer Staples ETFs… They are leading the entire market with annual returns of 23.28%, 19.6% and 16.5% YoY as of 6/24/2019. The only discernible metric I can identify is companies in these sectors produce consistent and predictable cash flows in the name of dividends. The big drivers of the Utilities ETF XLU are Nextera Energy and Southern Company, each accounting for 3.47% and 1.98% positive return for the entire ETF. Investors are flocking to dividend paying companies as US treasury yields collapse, specifically the 10 year crashing below 2%. Investors have a need for income and it can’t be met with historically low treasury rates.
The other factor I see is these are interest rate sensitive sectors, meaning when interest rates fall the stocks in these sectors perform. As of June 2019, investors are anticipating the Federal Reserve to lower interest rates three times by the end of the year, with the rate cuts being 25 basis points each. This interest rate cut sentiment has driven investors hard into the treasury market, making it impossible for fixed income investors to meet their annual income needs.