Don't Bet on This All-Time High

It has been a great year for stocks... with all kinds of companies performing well.

In this kind of environment, we'd expect the most exciting stocks to be leading the way. But the exact opposite has happened.

The best-performing sector this year has been the most boring of them all... utilities.

These are simple companies. They don't sell flashy new products or innovations. Yet they've managed to lead the market higher this year.

The sector recently hit its first new all-time high since 2022 – and it's still making new highs.

But in this case, a new high isn't good news... Instead, we should expect the recent rally to end soon.

Utilities can't grow to the sky. These companies are in the business of picking up trash and keeping the lights on.

That's why most investors think of these stocks as a boring part of the market... something you only think about buying if you want to collect a safe dividend.

That reputation hasn't proved true in 2024. Again, utility stocks are up 29%. That makes them the best-performing sector by far this year.

Not only that, but utilities just staged a major breakout. They hit a new all-time high last month. You can see this on the chart below, based on the performance of the Utilities Select Sector SPDR Fund (XLU). Take a look...

Most sectors that have hit new all-time highs did so earlier in the year. The fact that utilities are doing it just recently – even after an incredible year of gains – shows the boring nature of these companies.

It's clear the trend is in the sector's favor right now. But according to history, that might not be enough...

You see, utility stocks have hit nine other new all-time highs over the past two decades. And overall, those proved to be terrible times to invest in the sector. Take a look...

Utilities might be boring, but that doesn't make them bad investments. The sector has returned 5% a year over the past two decades... And that excludes dividends. Once you include dividends, the sector nearly keeps up with the overall market, and with less volatility.

Still, buying at new highs isn't a great entry point for utilities. Similar setups led to 0.8% gains in six months and 2.6% losses over a year. Worse, the sector was down over the next year in nearly half the cases.

This doesn't mean utility stocks will crash from here. But they likely won't be the top-performing sector for much longer.

Boring sectors can win big... but only for so long. And according to history, the biggest gains in the utility boom are likely behind us.

Good investing,

Brett Eversole