If a Stock Market Correction Is Coming, History Says This ETF Has Always Protected Long-Term Investors

This is less a “utilities are safe” story than a duration and funding-cost trade. If the next equity drawdown is accompanied by falling real yields, regulated utilities can outperform broad equities because their cash flows look more bond-like while their dividend spreads become more attractive; if the selloff is inflationary or rates back up, the sector can disappoint despite stable demand. Within the group, the highest quality balance-sheet names with visible capex programs should capture the most multiple support as investors pay up for duration plus growth.

The second-order winner is not the whole basket but the subset with transmission, grid modernization, and data-center load exposure. Those businesses can convert AI-driven electricity demand into regulated rate-base growth, which is a cleaner earnings path than merchant power exposure. By contrast, more cyclical power producers are only superficially defensive; in a recession, lower power prices and weaker industrial load can compress spreads faster than investors expect.

The contrarian risk is that the market already knows utilities are defensive, so the trade can be crowded and rate-sensitive. The setup works best over days to weeks in a risk-off tape, then over 1-3 months if the macro data push Treasury yields lower; it can break over 6-18 months if long rates stay elevated and financing costs offset the demand story. Key falsifiers are a sustained rise in the 10-year yield, widening utility credit spreads, or underperformance versus SPY during the first risk-off leg.