The Riskalyze Report: Advisors buy into Utilities rally

At the request of so many investment advisors, my friends at Riskalyze share the big trends in the assets going into and coming out of advisor portfolios every week. The underlying data is aggregated from hundreds of thousands of client accounts across the $120 billion and counting that advisors manage on the Riskalyze platform*. I hope we can uncover interesting trends for you each week…

Riskalyze

February 26th – March 4th

Winners (advisor flows TO these investments increased substantially):
  1. Floating Rate (FLOT, FTSL)
  2. Utilities (XLU)
  3. Dorsey Wright Focus 5 (FV)

Losers (advisor flows FROM these investments increased substantially):

  1. ConocoPhillips Co (COP)
  2. Russell 1000 Value (IWD)
  3. Consumer Staples (XLP)

 

Josh here – Utilities are back in vogue, which is curious given the rate hike certainty now on display in the Fed Funds futures market (100% chance of a raise, the traders believe). But here’s something even more interesting – the utilities sector is the only S&P 500 sector with a negative correlation to the index over the last month. And that doesn’t mean it went down – it actually gained 2.5% vs the SPX’s 3% gain.

As Nick Colas of Convergex explains, the Utes simply zigged when the market zagged:

Over the past 30 days, US large cap Utilities have been negatively correlated to the price action in the S&P 500 to the tune of (25.3%).  It is the first negative reading we’ve seen since we started tracking this data on a monthly basis back in October 2009…the Utility sector did get pretty close to zero correlation twice: June 2014 (5.3% correlation to the S&P 500) and August 2016 (2.4%).  But this is the first reading below the zero line. 

According to Nick, the leading sectors – financials, tech and industrials – have seen correlations to the market spike up to 80%. But there is money to be elsewhere, utilities being a case in point.

Just above the utilities in the winners column, we see a somewhat opposite bet – floating rates. I’m guessing these two things do not have the same buyers. Now we got ourselves a ballgame.

*(to state the obvious, Riskalyze does not share client sensitive data with me or use animals in testing).  

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