Very interesting observation that XLU (Utilities) & XLV (Healthcare) are out performing the S&P500 since the start of 2014. Utilities and Healthcare are the defensive in nature.
Investopedia explains ‘Defensive Stock’
Defensive stocks remain stable during the various phases of the business cycle. During recessions they tend to perform better than the market; however, during an expansion phase it performs below the market. Betas of defensive stocks are less than one.
To illustrate this phenomenon, consider a stock with a beta of 0.5. If the market is expected to drop 15%, and the existing risk-free rate is 3%, a defensive stock will only drop 9% (0.5*(-15%-3%)). On the other hand, if the market is expected to increase 15%, with a risk-free rate of 3%, a defensive stock will only increase 6% (0.5*(15%-3%)).
The utility industry is an example of defensive stocks because during all phases of the ...
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