Source: Zhitong Finance
Bank of America stock and quantitative strategist Savita Subramanian (Savita Subramanian) said on Monday that increased volatility in the short, medium and long term would make utilities and other quality and yield stocks more attractive than growth stocks. Subramanian raised the utility sector's rating from Market Weight (Market Weight) to Accumulation (Market Weight) in light of the belief that increased volatility and lower interest rates would bring better returns than technology stocks.
The current increase in global environmental volatility is increasing. For many market observers, uncertain events such as global growth prospects, Middle East tension, and the US presidential election are reasons why the market expects the defensive utilities sector to outperform the market. Britney Lam, head of stock long and short at Magellan Investments Holdings Ltd., pointed out that at a time when central banks around the world are about to enter a cycle of interest rate cuts, investors are paying more and more attention to cash flow and dividend yields.
In his report to clients, Subramanian wrote: “I prefer turtles (quality and income) over hares (growth and re-grading). The return on utility stocks is comparable to the Nasdaq index in the long run.” Utility stocks also outperformed tech stocks this year, she said.
The S&P 500 utility classification index has risen slightly more than 19% so far this year, making it the best performer among the 11 market segments in 2024, surpassing the IT sector. In terms of total returns, utility stocks (which usually provide generous dividends) rose more than 22% in 2024, nearly 3 percentage points higher than technology stocks.
The strategist said falling interest rates could make utility stocks more attractive. Bank of America expects the terminal interest rate to reach 3.25% by 2025, which will create conditions to make dividend yields on utilities and real estate stocks “more attractive because of their inherent protection from inflation.” Bank of America is still reducing its holdings in technology stocks.
Editor/jayden