It’s a no-brainer why traders like to invest in utility stocks.
I mean, they’re no Amazon or Apple, but they do offer attractive dividend yields. And while inflationary pressures are hard on a stock’s value, Utilities tend to rise when inflation is moderate.
They also make great defensive plays when the broader market looks overbought, but that’s a topic for another day…
There’s a good chance this sector will break higher — especially if the economy expands and inflationary pressures increase — which is the most likely scenario right now.
But if we go the other way and head into another lockdown, speculative stocks will sell off much faster than yield-rich defensive utilities. So investing in utility stocks are excellent offensive and defensive plays in my book.
Why Traders Need to Invest in Utility Stocks
When the broader market stocks drop, investors and traders usually seek safety in fixed-income bonds, or high-yielding utility stocks as an alternative.
But don’t forget….
The market’s becoming increasingly vulnerable and the Federal Reserve might shorten the timeline on its bond-buying program.
So it’s never been a better time to invest in utility stocks — definitely in light of the fact that the sector is sitting near the highest level we’ve seen since the initial COVID-19 meltdown in February 2020.
If you look at the Utilities Select Sector SPDR Fund (NYSEArca: XLU), which tracks the performance of utility stocks, you’ll notice that it tested these levels once in November 2020, again in April 2020, and then on Aug. 6, 2021.
So check out my short video below to learn more about why it’s best for traders to invest in utility stocks right now. And I’ll even throw in a few of my favorite names to help you get started!
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P.S. From 1993 to 2021, traders would have lost 10% of their money buying and holding the S&P 500 during the day…
Yet if they’d bought at the close and sold again right at the open, they could’ve seen an 812% increase on their investments.
Where did all the gains come from?
And one former $700 million hedge fund trader just revealed how he’s exploiting these overnight moves on a handful of stocks every single day.