U.S. Utilities Shares Outperforms Traditional Havens Amid Global Coronavirus Epidemic
U.S. utilities shares have outperformed other conventional havens in recent days, as worries over the coronavirus epidemic sparked a race to safety.
The S&P 500 Utilities index is up about 3.2% since January 21, when the first case of novel coronavirus was reported in the U.S. The index has soared 6.6% this month, logging its best month-to-month gain since 2016 and beating each sector in the S&P.
By comparability, gold soared 1.8% in that interval, while the Japanese yen notched a 1.6% gain, and the greenback edged lower. The ICE BofA US Treasury Index, which monitors the performance of U.S. greenback-ruled sovereign debt publicly issued by the U.S. authorities in its domestic market, surged 2%.
Comparatively high yields and expectations of regular earnings during troubled times have made utilities a preferred destination for nervous investors.
With the financial toll of the coronavirus epidemic, nonetheless unclear, utilities have recently drawn those seeking to cut exposure to riskier assets while remaining in equities, which have outpaced most different markets over the last decade.
The benchmark S&P 500 Index is down around 3% since January 21 however remains near record highs earlier last month. Betting against shares has been a losing strategy in the course of the more-than-decade-long bull market: the S&P yielded 29% in 2019 regardless of a trade battle between the U.S. and China and worries over a slowdown in world economic growth.
Analysts at Goldman Sachs said they anticipated a 0.4 percentage point hit to U.S. annualized development in the first quarter, followed by a rebound in the second.
Some analysts believe that a severe worsening of the virus outbreak might push Treasury yields lower and further enhance the appeal of utilities.