Roger S. Conrad

The 2022 bear market for stocks and bonds entered a new, more destructive phase last month, following the Federal Reserve’s 75 basis point increase in the Fed Funds rate. And there’s every indication things will get worse before they improve.

Since the beginning of 2022, the Japanese Yen has dropped by almost -20 percent against the US dollar. That’s shrunk a 29.8 percent year-to-date local market gain in shares of dominant Japanese telecom Nippon Telegraph and Telephone (Tokyo: 9432, OTC: NTTYY) to a return of just 1.3 percent in US dollar terms.

Bloomberg New Energy Finance reports wind and solar power combined produced 10.5 percent of global electricity in 2021. They also accounted for a record 75 percent generating capacity entering service. And output will grow another 8 percent this year to nearly 320 GW, according to the International Energy Agency.

Utilities have been dropping for roughly a month. And despite the sector’s robust long-term outlook, it’s likely we’ll see lower prices still in the coming weeks.

This year is shaping up as a banner one for dividend increases in the Utility Report Card coverage universe. So far, 103 of the 179 companies tracked have raised their payouts at least once. And I count roughly three-dozen more that will almost certainly deliver a boost between now and December 31.

“Dream Buy” prices are levels of valuation that historically have been reached only under extremely bad market conditions. But provided underlying businesses stay strong, buyers there will realize windfall gains.

Stocks’ summer rally swung into reverse starting mid-August. And with the Federal Reserve pushing hard against stubbornly high inflation, it’s unlikely we’ve seen maximum damage or duration of what’s looking more and more like a real bear market.

Among the very few pockets of strength are regulated utilities. Even as the S&P 500 is again at a -17 percent year-to-date loss and income benchmark iShares Select Dividend ETF is in the red by -1.6 percent, the Dow Jones Utility Average is well in the black with a 5.66 percent total return.

Shares of Aggressive Holding Avangrid Inc (NYSE: AGR) trade basically where they began 2022. That underperformance of the Dow Jones Utility Average is no surprise, with the US arm of 81.65 percent owner Iberdrola SA (Spain: IBE, IBDRY) facing regulatory and operating uncertainty on three fronts. And Wall Street is obviously skeptical, with six “underweight/underperform/sell” recommendations by Bloomberg Intelligence-tracked analysts last month.