If a Recession Is Coming, History Says Utilities Aren't Safe, Just "Less Bad." Here's the Data.
Key PointsFunds like the State Street Utilities Select Sector SPDR ETF provide some recession buffering.
The State Street Utilities Select Sector SPDR ETF (XLU) is a benchmark for utilities stocks, which are often considered defensive during recessions. While utilities have historically outperformed the broader market during economic downturns, the SPDR ETF has not been "safe" in every recession. In the tech bubble recession (2000-02), utilities lost 34.3%, slightly less than the 42.4% decline in the S&P 500.
During the 2007-09 global financial crisis, utilities lost 29%, compared to the 56% drop in the S&P 500. The 2020 COVID-19 recession saw utilities gain just 0.6%, compared to the 18.4% rally in the S&P 500. Finally, in the 2022 economic contraction, utilities gained 1.4%, outperforming the 18.2% decline in the S&P 500. However, these gains are still considered merely "less bad" compared to the broader market declines.
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