The Fed kept benchmark interest rates unchanged at its policy meeting on December 11. It also indicated it would hold the rates steady through the end of next year, suggesting a major driver of defensive stocks might not be there next year.
Top utility stock Southern Company (SO) has surged more than 40% this year, the most among utilities. The biggest utility stock by market cap, NextEra Energy (NEE), has soared by 35% year-to-date.
Investors generally prefer utility stocks due to their stable stock price movements and higher dividend yields. Lower interest rates have also played a vital role in driving these defensives.
The Fed lowered benchmark interest rates by 25 basis points in July, September, and October. Utility stocks, on average, surged almost 10% in this time. The ten-year Treasury yield fell almost 16% in the same period. The Utilities Select Sector SPDR ETF (XLU) hit an all-time high in September.
View more information: https://marketrealist.com/2019/12/utility-stocks-fare-2020-no-rate-cuts/