Roger S. Conrad

The Dow Jones Utility Average has returned roughly 6 percent year to date. That compares with a -12 percent decline for the S&P 500, even after the past month’s torrid rally. Re-shoring of investment to the US, growing popularity of domestic businesses, low relative valuations and utilities’ well-earned reputation for resilience are four good reasons for outperformance. And as the feature article highlights, benefits from the Inflation Reduction Act of 2022 are a solid fifth.

Companies operating in multiple businesses frequently trade at a “conglomerate discount” to more focused rivals. This month, Aggressive Holding MDU Resources (NYSE: MDU) became the latest utility to simplify—announcing a tax-free spinoff to shareholders of its Knife River construction materials division.

Weaker Q2 results from US communications giants apparently led some investors to assume the same for BCE Inc (TSX: BCE, NYSE: BCE). That didn’t happen, as the company posted solid numbers and affirmed 2022 guidance for growth in revenue, EBITDA, earnings per share and free cash flow.

The Dow Jones Utility Average has surged by roughly 150 points since mid-June. That’s a rally not a lot of people expected. And a good bit of the move followed something probably even fewer were looking for: The grand bargain between Senator Joe Manchin (D-WVA) and the White House that became the still-evolving “Inflation Reduction Act of 2022.”

There are growing signs of a deeper recession ahead. And the US Federal Reserve is unrelenting pushing borrowing costs higher to bring down inflation to its long-term target of 2 percent.

Investors and especially the media have a tendency to get carried away when it comes to the potential impact of government-led energy policies. The renewable energy stock boom that followed President Biden’s late 2020 election largely fizzled before he even took office. And the oil and gas companies supposedly targeted by administration policies have been on a major roll since.