This Sector Is Ripe for a Rebound in 2024

Now is the time to buy! [Shield] AN OXFORD CLUB PUBLICATION [Wealthy Retirement]( [View in browser]( SPONSORED [Better Than Oil Stocks]( [Click Here to Play]( The best way to profit from energy is NOT a stock... Rather, it's [this little-known alternative investment](. [CLICK HERE TO FIND OUT MORE]( [THE VALUE METER]( [This Sector Is Ripe for a Rebound in 2024]( [Jody Chudley, Contributing Analyst, The Oxford Club]( [Jody Chudley]( The market is currently forecasting that the Federal Reserve will start cutting rates in the spring. From there, the central bank is expected to continue lowering rates for at least a solid year and a half. [Chart: Market Expecting Nearly 2 Years of Rate Cuts]( That means now is the perfect time to buy utility stocks. Utilities are a classic example of a sector that is sensitive to interest rates. The companies in this sector provide electricity, heating, telecommunications and other essential services. They have steady customer demand, predictable cash flows, very capital-intensive operations and nice dividends. But to pay for the expensive items they need in order to conduct business, utilities generally carry a heavier debt load than companies in other sectors. That additional debt makes the sector sensitive to interest rate changes. When rates go up, the interest that utilities have to pay on their debt goes up. That has a negative impact on profits, which makes the stocks less attractive to investors. When rates go down, the opposite happens. Interest decreases, and profits go up. This is a primary reason the utilities sector tends to do poorly when rates are rising and outperform when rates are falling. Utility stocks also outperform when rates move lower because they often pay strong dividends, which become more and more attractive as rates continue to drop. As rates fall, the yields on bonds and term deposits also decline. But dividend yields don't. And the further rates fall, the better utilities' sizable dividends start to look. Will History Repeat Itself? We don't have to speculate on how utility stocks perform when interest rates start falling. One study looked at eight different interest rate hiking cycles and found that every single time interest rates hit their peak, it was a positive sign for the utilities sector. History is telling us that utilities are poised to outperform. And recent performance also tells us that the utilities sector is more than ready for a bull run. Utility stocks have massively underperformed the S&P 500 in 2023. [Chart: Utilities Have Lagged the Market in 2023]( Thanks to the big rally we've seen this year, I think the overall market is carrying more risk than usual. I recently wrote about how seven huge tech stocks have been [dominating the S&P 500]( (and how those stocks are [definitely not cheap](. After a roaring 2023, it is quite likely that these seven tech stocks will have a reversal in 2024... and that the S&P 500 will struggle because of it. As the money leaves those stocks, some of it is going to go to dividend-paying utilities, which are much more attractively valued right now. The apparent peak in interest rates is also serving as a clear catalyst for utilities to lead the way in 2024. With all of that in mind, here's my favorite way to play the utilities sector in the coming months... [GET MY FAVORITE UTILITIES PLAY]( [Investment U Conference 2024 at the Ojai Valley Inn & Spa in Ojai, California, February 26-29, 2024]( SPONSORED [[AVAILABLE NOW] Supercharge Your Returns With Artificial Intelligence]( Can you imagine using artificial intelligence to supercharge your investment results? Thanks to the secret we'll reveal during The Predictive AI Profits Event on Tuesday, December 19, it's possible! 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