Boring Beats Brilliant: How a Utilities ETF Has Quietly Trounced the S & P 500 in Nearly Every Recession This Century

"Defensive stocks, which are defined as those supplying indispensable goods and services regardless of economic climate, such as utilities, food, personal care products, and medicines, often hold their own and even eke out decent gains during recessionary times. A number of them, such as Walmart, Procter & Gamble, and Con Edison, are in the S&P 500 and played a role in its resilience."

"However, there is a relatively humdrum ETF that has soundly outperformed the S&P 500 during the last 2 of 3 recessions this century, (it didn't start until 2004): the Vanguard Utilities Index Fund ETF Shares (NYSE: VPU | VPU Price Prediction). Vanguard Utilities Index Fund ETF Shares"

"Conceived of to track the MSCI US Investable Market Utilities 25/50 Index, VPU's inception date was January 26, 2004. It is passively managed, and holds over 99.2% utilities stocks with the remainder either energy or industrials. The utilities stocks are from the electric, water, gas, or nuclear industries. The total number of stocks held at the time of this writing is 67."

"As one might expect, the growth factor is a lower priority for these industries than consistency, reliability, and minimal volatility. As a result, investors in VPU appreciate and rate these factors to be of greater importance: Cash-Flow Stability : Utilities are essential services, so water and electricity demands are constant (although the recent prolifera"

The US has avoided a true depression since the early 20th century, but multiple recessions have occurred since 2000, including the dot-com crash in 2001, the subprime mortgage meltdown in 2007–2008, the Covid-19 pandemic in 2020, and a technical recession in 2022. During these downturns, the S&P 500 declined, while defensive stocks that provide indispensable goods and services tended to hold up better. Utilities are described as particularly resilient because demand for essential services like water and electricity remains steady. The Vanguard Utilities Index Fund ETF Shares (VPU) tracks the MSCI US Investable Market Utilities 25/50 Index, is passively managed, and holds mostly utilities stocks from electric, water, gas, and nuclear industries. The fund’s performance is attributed to cash-flow stability, reliability, and minimal volatility.

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