- Posted by JC Parets on December 18th, 2014 at 1:25 pm
One of my favorite themes throughout 2014 has been that lower interest rates are here to stay. One of the big tells early in the year was the outperformance of both Utilities and REITs, which each pay some of the highest dividends of any of the S&P sectors. I was writing about this in February in a post titled, “These 2 Sectors Are Pointing To Lower Rates”. Sure enough, not only have Interest Rates fallen all year but each of these sectors are up 25% year-to-date while the S&P500 is up just 10% and some of the smaller-cap indexes are only up low single digits. Investors are not getting the yield they’re looking for in the bond market, so they turn to high dividend paying stocks instead. These two have therefore been the biggest benefactors.
So heading into 2015, how should we position ourselves for this low rate environment? I don’t see any reason to get cute. Short-term, yea Utilities did great this year. No doubt about it. But structurally they’ve barely even broken out. I think one of the more impressive setups out there has to be the longer-term chart of Utilities relative to the S&P500. Here is a weekly line chart going back to 2008 showing this falling wedge well-defined by two converging downward sloping trendlines:
I think if this breakout is for real and can take out those April highs marked by the red horizontal line, we could really be off to the races. Not only can this be a great trade for 2015 (again), but would signal that interest rates aren’t going anywhere. The Fed Fund Futures market continues to price in record low rates for all of 2015 and these guys have been dead right from the beginning. The outperformance of higher dividend paying stocks confirms that and I believe that a big breakout in this chart above would really back up our low rates thesis.
Here is a closer look at the Utilities vs S&P500 chart above. This is a daily line chart showing the ratio bumping up against overhead supply 6 times since last summer. The more times that a level is tested, the higher the likelihood that it breaks out. So I think this one is poised to make a big splash in the first quarter:
This is one of the more powerful themes around the world that I am currently watching.
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A Non-Random Walk Through Canadian Dollars
Posted by JC Parets on December 16th, 2014 at 2:57 pm
After the initial breakout earlier this year and successful retest of former resistance, I have consistently said that the USD/CAD chart is one of my […]
Fox Business: Retail Stocks & Government Shutdowns
Posted by JC Parets on December 12th, 2014 at 2:16 pm
This week I was on a panel with David Asman on Fox Business about retail stocks and the impact that a government shut down may […]
United Technologies Breaks Out vs S&P500!
Posted by JC Parets on December 10th, 2014 at 6:22 pm
Ratio analysis is something that I do every day in order to help me find some of the best risk/reward opportunities in the world. Remember, […]
Latin America Hits 9-Year Lows vs Emerging Markets
Posted by JC Parets on December 9th, 2014 at 12:39 pm
One of the biggest themes for me over the past few years has been the consistent underperformance out of Emerging Markets relative to U.S. Stocks. […]
My One-On-One Interview With CEO.CA
Posted by JC Parets on December 8th, 2014 at 12:08 pm
Last week I sat down with the CEO Technician over at CEO.CA to talk about my methodology in the market, how I utilize sentiment, what […]
What’s There Not To Like About REITs?
Posted by JC Parets on December 5th, 2014 at 6:20 am
Please tell me that what is holding you back from buying REITs is a rising rate environment. Please oh please make that your excuse. Nothing […]
ABC News: Do We Buy Gold or other Metals?
Posted by JC Parets on December 4th, 2014 at 11:49 am
This week I was over at the ABC studios on the Upper West Side to talk about Gold and other metals. I think it’s important […]
What Are The Best Sectors In America?
Posted by JC Parets on December 3rd, 2014 at 11:31 am
One of the exercises that I find really valuable is comparing the relative performance of each of the S&P sectors to each other. Today we […]
Fox Business: Metals and Treasury Bonds
Posted by JC Parets on December 2nd, 2014 at 8:15 am
Monday I was over at Fox Business talking about how it doesn’t matter that some people might think interest rates are too low. Based on […]
J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He is a 10-year veteran and Market Technician who actively manages money incorporating Technical Analysis and Behavioral Finance into his practice. JC’s work has been featured regularly on CNBC, Fox Business, Bloomberg, Business News Network, Wall Street Journal and Yahoo Finance among many other financial media outlets. More...
- Are Utilities Breaking Out Relative to S&Ps?
- A Non-Random Walk Through Canadian Dollars
- Fox Business: Retail Stocks & Government Shutdowns
- United Technologies Breaks Out vs S&P500!
- Latin America Hits 9-Year Lows vs Emerging Markets
- My One-On-One Interview With CEO.CA
- What’s There Not To Like About REITs?
- ABC News: Do We Buy Gold or other Metals?
- What Are The Best Sectors In America?
- Fox Business: Metals and Treasury Bonds
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