In this episode of "Options Jive," Tom and Nick discuss the role of utility stocks in a portfolio, particularly highlighting their defensive characteristics. They explain that utility stocks, which include companies providing essential services like electricity and water, are often favored by investors for their higher dividends and lower volatility compared to growth stocks. The hosts note that while utilities offer diversification due to their low correlation with other market sectors, they can be negatively impacted by rising interest rates, which make alternative investments more attractive. Conversely, decreasing interest rates could lead to a recovery in utility stocks. The discussion concludes with an analysis of trading strategies involving utility ETFs like XLU, emphasizing their potential for defensive positioning during market drawdowns.
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