Sell These 3 Utility Stocks Being Squeezed at Both Ends

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Sell These 3 Utility Stocks Being Squeezed at Both Ends


It strikes me, at times, how little humankind has changed over the centuries. The ancient Greeks waited for answers to the most pertinent questions of their day from the Oracle at Delphi – a high priestess that supposedly spoke to the god Apollo.

Today, Wall Street also waits for word from on high as to the future course of markets from the Federal Reserve. The new Chairman (or is it Oracle) Jay Powell will explain to the public why the Fed deemed it is necessary to raise the federal funds interest rates by a quarter percentage point again, to the range of 1.50% to 1.75%.

Market pundits will attempt to interpret exactly what the Fed’s future plans are by looking at the so-called dot plots to see if three or four interest rate hikes (including this one in March) are in Wall Street’s future. That ‘analysis’ will lead to classic, almost Pavlovian, response by some market participants to immediately sell some sectors in response to future higher rates.

One type of stock that will be sold is the so-called dividend aristocrats. The reasoning is straightforward… in the three years through 2017, the average yield on the dividend aristocrats index was 0.4% higher than 10-year Treasury yields, according to Bloomberg data. Now, the average dividend aristocrat offers a yield of 2.3% versus the more than 2.8% yield on the 10-year Treasury.

Utilities: Bond Proxies


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