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Executive Summary

Utility M&A Heats Up But Play the Long Game

By Roger S. Conrad on Jun. 10, 2024

Utility mergers and acquisitions are heating up again. But utility stocks’ spring momentum has at least temporarily cooled.

The Dow Jones Utility Average is still up solidly with a 6.3 percent year-to-date return, much better than most dividend paying sectors. But utilities are again lagging returns of 13.3 percent for the Nasdaq 100 and 12.8 percent for the S&P 500.

The reason for the reversal: Yet another shift in investor expectations for Federal Reserve policy. And the consensus now is we’ll see few if any rate cuts this year.

The central bank claims to be “data driven” in its decisions. But what that really means is they’re reacting to numbers that are frequently and dramatically revised, rather than anticipating to actively set policy. And the result is stock and bond markets are vulnerable to wild swings from seemingly every piece of new information that might influence Fed decisions.

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