Utilities Under Pressure as Risk Appetite Makes a Sudden Comeback – A Utilities Roundup
15min read Investors, buckle up! The utilities sector has been caught in a whiplash this April. After a strong start to the year, utilities stocks are now slipping as risk appetite suddenly perks up—thanks to a temporary truce in the U.S.-China tariff war. But here’s the twist: this rebound might be a false dawn. Let’s unpack what’s really moving the market and whether utilities still have legs.
Why Utilities Are Slipping: The Risk-On Rally
Utilities have been the poster child of defensive investing in 2025. The S&P 500 Utilities Index rose 2% year-to-date (YTD), while the broader market sank. But now, a 90-day tariff pause between the U.S. and China has investors scrambling back into riskier assets. The S&P 500 surged 10% in a single day after the news—but that euphoria is fading fast.
Ask Aime: Will the utilities sector rebound or is it a false dawn?
The SPDR Utilities ETF (XLU) is down 0.4% in recent trading, even as it remains up 2.5% YTD. The problem? Cyclical sectors like tech and industrials are stealing the spotlight. When the tariff clouds part, investors pile into growth stocks, and utilities—those steady dividend machines—get left in the dust.
The Tariff Truce: A Double-Edged Sword
The pause in tariffs may have sparked a rally, but it’s no panacea. The Fed is stuck in limbo, holding rates at 4.5% as it navigates a minefield of inflation and slowing growth. Tariffs have already inflated demand (March retail sales jumped 1.4%), but they’re also squeezing margins. Fed Chair Powell’s warning about stagflation—stagnant growth plus inflation—has investors on edge.
The VIX, the market’s “fear gauge,” spiked to 60.13 in early April—the highest since 2020—but has since calmed to around 30. That volatility isn’t over. Until tariffs are fully resolved, utilities will stay in demand as a “safe haven,” but their short-term dip isn’t over either.
Utilities’ Defensive Strength: Still a Must-Hold?
Don’t write off utilities yet. Their dividend yields are a lifeline in a low-yield world. The sector’s average dividend yield is 3.2%, compared to the S&P 500’s 1.7%—and that’s before you factor in tax breaks. Plus, AI’s rise isn’t just about chips; it’s also about energy. Data centers and smart grids need power 24/7.
Utilities like NextEra Energy (NEE) and Dominion Energy (D) are betting big on renewables, which could future-proof their growth. But here’s the rub: if the tariff truce turns into a lasting peace, investors will rotate back to tech and industrials. Utilities could lose their luster.
The Technicals and Sentiment: A Bearish Mood, but a Bullish Signal?
The numbers are screaming “bottom fishing time.” Only 28% of S&P 500 stocks are trading above their 200-day moving average—a level that historically signals a rebound. The AAII Sentiment Survey shows 56.9% of investors are bearish—a level that’s preceded market rallies eight times in the past decade.
Last Price($)  | Last Change% | Index | Monthly Closing Price($)2025.04.25  | ma2002025.04.25 |
|---|---|---|---|---|
| 7.07K | -1.06% | S&P 500 | 7.07K | 2.79K |
| 4.84K | 0.22% | S&P 500,NASDAQ-100,Nasdaq | 4.84K | 1.59K |
| 3.61K | -0.01% | S&P 500 | 3.61K | 1.05K |
| 1.95K | 0.80% | S&P 500 | 1.95K | 328.85 |
| 1.38K | 0.74% | S&P 500 | 1.38K | 389.18 |
| 1K | -0.38% | S&P 500,NASDAQ-100,Nasdaq | 1K | 366.72 |
| 1.33K | -0.09% | S&P 500 | 1.33K | 227.21 |
| 1.10K | 0.42% | S&P 500,NASDAQ-100,Nasdaq | 1.10K | 232.91 |
| 1.06K | -1.23% | S&P 500 | 1.06K | 614.07 |
| 1.01K | -0.52% | S&P 500 | 1.01K | 340.18 |
Ticker |
|---|
| NVRNVR |
| BKNGBooking Holdings |
| AZOAutozone |
| FICOFair Isaac |
| TDGTransDigm Group |
| ORLYO'Reilly Automotive |
| TPLTexas Pacific Land |
| NFLXNetflix |
| MTDMettler-Toledo |
| GWWW.W. Grainger |
But here’s the catch-22: utilities are a refuge because the market is unstable. If stability returns, their appeal fades. Investors must decide: Is this tariff truce the start of a lasting recovery, or just another hiccup in a rocky road?
Conclusion: Hold the Fort—or Dive Into Tech?
Utilities are in a bind. Their YTD outperformance is real, but their recent dip shows how fickle risk appetite can be. Here’s the data:
- The S&P 500 is still 12% below its all-time high, meaning this isn’t a full-blown bull market.
- The Fed’s hesitation on rates means inflation could roar back, keeping utilities’ defensive role intact.
- A full tariff rollback could trigger a cyclical rally—but until then, utilities remain a safer bet.
Investors should keep utilities in their portfolios, but don’t go all-in. Pair them with cyclical stocks you can flip if the market truly turns. This is a sector for steady hands, not gamblers. Stay vigilant—because in 2025, the only constant is change.
Stay tuned, and remember: When in doubt, follow the dividends!
