With the Federal Reserve seemingly conquering inflation and the rate cut in September becoming a" done deal, the market finally breathed a sigh of relief.

As the Federal Reserve's monetary policy shifts from tightening to easing, astute investors are further asking which assets are likely to have investment opportunities as global monetary policy shifts, interest rates fall, and a new round of liquidity loosening cycle is imminent.

In addition to yesterday's article"A global interest rate cut cycle may be initiated! US medical stocks are ready to soar, how to capture the explosive opportunities accurately?"In addition to the medical stocks mentioned, the utilities sector is also one of the beneficiary industries.

With the September rate cut by the Federal Reserve almost a done deal, the yield on the 10-year Treasury notes has dropped to approximately 3.8%. This change makes the dividend income of utility stocks relatively more attractive, providing investors with an alternative investment option in a low interest rate environment.

Based on historical data, $U.S. 10-Year Treasury Notes Yield (US10Y.BD)$ and $Utilities Select Sector SPDR Fund (XLU.US)$ There is a clear negative correlation, and the gradual decline in the yield of 10-year US Treasury bonds has also laid the foundation for the rise of utility stocks.

Utilities have become one of the hot sectors in the US stock market.

This year, the public utilities sector has quietly become one of the hottest sectors in the US stock market.

As of August 26th, $Utilities Select Sector SPDR Fund (XLU.US)$ the year-to-date increase is close to 22%, outperforming$S&P 500 Index (.SPX.US)$And the Nasdaq, also outperformed the market darling. $The Technology Select Sector SPDR® Fund (XLK.US)$.

In the utilities sector, the American electric power giant $Vistra Energy (VST.US)$ and the largest carbon-free nuclear power giant in the United States $Constellation Energy (CEG.US)$ And American energy giants. $NRG Energy (NRG.US)$ are the top three stocks in the industry this year, with gains of 121%, 67%, and 65% respectively. It's worth noting that these three companies are also beneficiaries of AI, as the demand for electricity continues to rise with the accelerating construction of AI data centers by technology giants.

In addition, wind power giant $GE Vernova LLC (GEV.US)$ public service electric and gas company $Public Service Enterprise Group (PEG.US)$$NextEra Energy (NEE.US)$ One of the largest natural gas distribution companies in the United States $NiSource (NI.US)$ The fourth largest power plant in the United States $Southern (SO.US)$ Utility giant in the United States $American Electric Power (AEP.US)$ As well as the American energy giant $Dominion Resources (D.US)$ The year-to-date increase is between 23% and 39%.

In addition to utility stocks, the US stock market also has many ETFs related to utilities worth investor attention, among them,$Utilities Select Sector SPDR Fund (XLU.US)$Please use your Futubull account to access the feature.$Global X Funds Global X U.S. Infrastructure Development Etf (PAVE.US)$Please use your Futubull account to access the feature.$Vanguard Utilities ETF (VPU.US)$Please use your Futubull account to access the feature.$S&P Global Infrastructure Index Ishares (IGF.US)$Please use your Futubull account to access the feature.$Ishares U.S. Infrastructure Etf (IFRA.US)$ These ETFs are among the top 5 largest utilities ETFs in the US market. They have performed well this year, with cumulative gains ranging from 12% to 22%.

Why are utilities stocks attractive at the current point in time?

First, the macro environment. The US Treasury yield may continue to decline in the next year, and utility stocks usually perform well in a environment of declining interest rates and economic recession.

The utilities sector is composed of companies providing infrastructure services, typically including electricity, natural gas, water affairs, and other related services. Due to the stable and defensive nature of utility companies' business, the utilities sector often exhibits relatively stable characteristics during market fluctuations, making it a defensive sector.

Secondly, during a period of declining interest rates, investors seeking income typically turn to public utilities due to their high and stable dividend yield.

As fixed income securities (such as bonds) yields decline with falling interest rates, utilities attract investors seeking stable returns and long-term income due to their stable cash flow and higher dividend yields.

This year, the utilities sector's annual profit growth is at least 6%, and its 3.6% yield is competitive compared to interest rates. In the context of interest rate cuts, utilities companies' dividends will continue to increase.

Thirdly, utilities are capital-intensive enterprises, often financing their infrastructure investments by raising capital.

In an environment of falling interest rates, with lower borrowing costs, stock valuations usually rise, making it easier for utilities to finance their operations and expansion projects. This lower cost of capital not only increases their profit margins but also allows them to invest in more growth opportunities.

Fourth, with the current attractive valuations and the potential for valuation recovery after a decline in 2023.

Goldman Sachs previously stated that although the public utilities sector has experienced a significant increase in value this year, its valuation is still not high and can be considered a "well-rounded choice". Goldman Sachs stated that the current PE premium of public utilities stocks is only 6%, which is roughly in line with the historical average level compared to the equally weighted S&P 500 index.

Fifth, the power demand generated by the AI boom provides growth opportunities for the public utilities sector.

The surge in power demand caused by the rapid development of AI technology also provides growth opportunities for US public utilities stocks.

More importantly, compared to expensive tech giants like Apple and Google, investors now have the opportunity to enter the public utilities sector at a relatively low cost, participating in the AI technology revolution. This undoubtedly provides new opportunities for value-seeking investors.$NVIDIA (NVDA.US)$,$Microsoft (MSFT.US)$The rapid development of AI technology brings a surge in power demand and provides growth opportunities for US public utilities stocks. Compared to expensive tech giants like Apple and Google, investors now have the opportunity to enter the public utilities sector at a relatively low cost, participating in the AI technology revolution. This undoubtedly provides new opportunities for value-seeking investors.

Therefore, overall, investing in public utilities stocks is a good choice during the US interest rate cut cycle.

Is the US expected to cut interest rates? Interest rate-sensitive long bonds, small-value stocks, biotech stocks and other assets have benefited from the rebound, and savvy investors who have deployed early have already gained profits! If you are still unsure about which assets to allocate during an interest rate cut cycle? How to allocate?Take a look at the "Interest Rate Investment Lazy Pack" course, which comes with the most comprehensive guide >>.

Editor/Somer