2 min read

Cashing Profits in this Utilities Pick

Wait, what? Wasn't "inflation" supposed to be a thing of the past, vanquished by mighty Jay Powell and his knights of the Federal Reserve roundtable?

But after this morning's report on the consumer price index (CPI), inflation is - like a half-eaten tuna salad - apparently still "out there."

In other words, inflation was wedged into the proverbial back of the fridge in investors' minds. After being pleasantly invisible for an extended period of time, it suddenly made its presence known...by stinkin' up the joint with today's CPI report.

From what I read, higher shelter costs, and the increasing costs for labor (sometimes measured by what's called the "supercore" rate of inflation) are what's unsettling Wall Street today, with the major indexes all down 1.5 to 2% in late afternoon trading.

So is it "goodbye to second-half interest rate cuts" and "hello to 'higher (rates) for longer'"?

Yeah, it could be - at least judging from the downward action in utility stocks, and my pick, Essential Utilities (WTRG).

I still have a modest single-digit percentage gain in the stock. Given today's CPI report - and the look of WTRG's chart - I think it's best to go ahead and take profits at the market price today, and see if the utility sector still has more downside to go:

click to enlarge

Basically, all the utility stocks look like the chart above. I'd rather sell now and ask questions later.

Speaking of which, is that "it" for the market rally that started in early January?

I do not know. The portfolio is in something like 75-80% cash at this point, which shows my caution. I just don't like it when a handful of stocks (yeah, you know which ones I'm talking 'bout)...carry the market higher and higher - and everything else is either indifferent, or sinking like a mafioso swimming in the Hudson River with concrete boots.

But then again, if this is an AI-crazed "bubble"-type rally (some say it is and some say it isn't), then a selloff like today usually sets up some kind of bottom-fishing rally later on, a few days or a few weeks later, after the smoke clears.

So stay tuned.

Best of goodBUYs,