Utilities Surge To Top Sector Spot

February 11, 2016

With stocks off to their worst start since 2008, it's hard to find any bright spots in the market. The SPDR S&P 500 (SPY | A-98) is down 8.4% for 2016 as of this writing, and essentially every sector is in the red for the year.

But not all of them.

One of the 10 main sectors has actually rallied this year―and quite substantially. Meanwhile, the worst-performing sector of the year may surprise you. (Hint: it's not the worst performer of last year.)

Here we take a look at the six most noteworthy sector moves of 2016 so far:

Utilities Jump

The third-worst-performing sector of 2015, utilities have made a solid comeback in early 2016. Interest rates, which were expected to rise this year, actually fell substantially in January and early February, with the 10-year bond yield dipping to as low as 1.68% from 2.27% on Dec. 31 on the back of market turmoil.

As relatively safe businesses with high-dividend payouts, utilities are seen by some as an alternative to Treasurys. With government yields down, those dividends suddenly look more attractive. The Utilities Select SPDR (XLU | A-87) currently yields 3.5% and has returned 7.1% year-to-date.

Energy Not As Bad

Easily the biggest laggard of 2015 with its 21.5% loss, the energy sector finds itself in the middle of the pack this year. With its 9.6% year-to-date decline, perhaps the downtrend in the Energy Select SPDR (XLE | A-92) is beginning to slow.

That said, it's hard to get excited about energy from a fundamental standpoint in the near term. Many oil and gas firms face bankruptcy with prices this low, and dividends are being slashed aggressively.

Certainly, there's a case to be made for higher oil prices down the line, but investors may need to wait a while to see a sustainable turnaround.

Find your next ETF

Reset All