I respectfully disagree with your conclusions. Utilities will now, and increasingly, be growth companies because of AI. Furthermore, other defensive sectors (staples for example, but there are others) did not move. If you can comment on this I would appreciate it. Thanks.
I get where you're coming from, but I'm still not there yet. I have mixed feelings overall and I'm trying to figure out what's driving this move. I was of the belief that it was a defensive shift because low vol, value and gold were outperforming along with utilities, (although staples as you mentioned wasn't). That obviously changed last week when tech took over and cyclicals/defensives lagged again. Treasuries and gold did well again, so it's kind of all over the place.
Utilities have correlated tightly with China this year and, more recently, copper, so maybe there's something there. The thing that's got me skeptical of utilities tie to AI for now is that last year tech was up 40% in the first half and NVDA nearly tripled, but utilities were down 6% over the same time. They didn't rally then based on the AI trade, so I'm not sure what the catalyst is for them rallying on the AI trade now.
In short, I don't have any good answers, only opinions. I agree with long-term case for utilities based on energy demand due to AI and clean energy. I'm just not sure that this is it.
Thank you very much for your response and excellent observations. I also have doubts, very similar to yours, but it seems to me that the “growth because of AI” explanation is, perhaps, the most likely. Hugs
I respectfully disagree with your conclusions. Utilities will now, and increasingly, be growth companies because of AI. Furthermore, other defensive sectors (staples for example, but there are others) did not move. If you can comment on this I would appreciate it. Thanks.
I get where you're coming from, but I'm still not there yet. I have mixed feelings overall and I'm trying to figure out what's driving this move. I was of the belief that it was a defensive shift because low vol, value and gold were outperforming along with utilities, (although staples as you mentioned wasn't). That obviously changed last week when tech took over and cyclicals/defensives lagged again. Treasuries and gold did well again, so it's kind of all over the place.
Utilities have correlated tightly with China this year and, more recently, copper, so maybe there's something there. The thing that's got me skeptical of utilities tie to AI for now is that last year tech was up 40% in the first half and NVDA nearly tripled, but utilities were down 6% over the same time. They didn't rally then based on the AI trade, so I'm not sure what the catalyst is for them rallying on the AI trade now.
In short, I don't have any good answers, only opinions. I agree with long-term case for utilities based on energy demand due to AI and clean energy. I'm just not sure that this is it.
Thank you very much for your response and excellent observations. I also have doubts, very similar to yours, but it seems to me that the “growth because of AI” explanation is, perhaps, the most likely. Hugs
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