In a year when risk-off sentiment is dominating Wall Street, the market is sending a clear message: safety sells.
The 2025 bear market has delivered a powerful rotation away from speculative sectors and into classic safe havens. And as we look at sector performance year-to-date, the pattern couldn’t be more obvious. While high-beta growth industries like semiconductors, biotech, and consumer discretionary have cratered, three sectors are firmly in the green: gold, utilities, and consumer staples.
YTD Performance Snapshot
Here’s how it looks so far:
Meanwhile, at the bottom of the barrel:
Click on the table to the right for all of the market's sectors year-to-date performance.
It’s no coincidence that the bottom three are all speculative sectors tied to high-volatility themes like tech and energy exploration. These are the areas that thrived during the bull market but are now bearing the brunt of risk aversion. Investors aren’t willing to pay up for unproven growth stories in this environment.
Instead, they’re parking cash in sectors that have historically outperformed during bear markets—sectors with pricing power, predictable earnings, and dividends you can count on. And right now, utilities are leading the charge.
Utilities have always been a defensive stronghold. In periods of economic uncertainty, investors look for companies that offer stability, not speculation. Power and water don’t stop flowing just because GDP contracts. And when volatility surges—as it has over the past two months - investors pile into sectors with recurring revenues, regulated margins, and reliable cash flow.
The VIX spiked to multi-year highs in early April during the “Liberation Day” selloff. Utilities barely budged.
In fact, both XLU and GLD saw net inflows even during the rally that followed the S&P 500’s 17% plunge. That tells you everything you need to know about where institutional money is positioning.
Here are my latest comments on gold's rally and buying opportunities
But there’s more at work here than just defense.
Unlike prior bear markets where utilities were bought solely for safety, this cycle has a growth narrative too: artificial intelligence.
Massive AI data centers are creating an energy consumption boom—and utilities are reaping the benefits. These aren't one-time energy spikes. This is sustained, secular demand for reliable, high-capacity electricity to power AI models, chips, and server farms.
That trend has lit a fire under several utility names, especially those aligned with nuclear, clean baseload energy, and transmission infrastructure. And it’s exactly why some utility stocks are breaking out to all-time highs while the broader market is still underwater.
So if you’re looking for safety and upside, this is one of the few sectors offering both.
Below are three standout names in the Utility ETF (XLU) that are not only outperforming but are strategically positioned to benefit from long-term energy demand and investor rotation into safer plays.
Constellation Energy (NASDAQ: CEG)
CEG has become a clear leader in the new energy landscape. With a focus on nuclear power and carbon-free generation, Constellation is uniquely suited to meet the long-duration, high-reliability needs of AI data centers.
This is no longer a sleepy utility—this is a growth stock in disguise. With strong earnings momentum, new nuclear investment from big tech (including partnerships with Microsoft), and a secular trend in its favor, Constellation remains one of the most compelling risk-adjusted opportunities in the sector.
AEP delivers a solid blend of income and infrastructure. The company continues to benefit from rising industrial and commercial demand, especially in the Midwest and South, where AI server farms and chip plants are expanding.
With a growing rate base and regulatory support, AEP is generating consistent earnings growth. It also sports a healthy dividend yield—exactly what investors crave in this environment. Its defensive footprint plus exposure to next-gen energy needs makes it a core holding.
Exelon has quietly posted one of the best performances in the sector this year. Like CEG, it benefits from clean energy exposure—but its strength lies in being one of the largest pure-play transmission and distribution utilities in the country.
As grid modernization and electrification continue to ramp up, Exelon is well positioned to capitalize on infrastructure investment and power demand trends. With a low valuation relative to growth and a track record of dependable earnings, it’s become a quiet outperformer.
In a market like this, sector leadership matters more than ever. The S&P 500 is negative on the year, growth stocks are getting repriced, and the VIX is telling you that fear is still in control. Yet through all of that, utilities are not only holding up—they’re leading.
Why? Because they’re more than just a safe haven now.
With the AI energy boom serving as a powerful tailwind and a market chasing both yield and reliability, utilities are positioned to do something rare: outperform in a bear market with real growth upside.
Investors looking to protect capital while still playing offense should be paying close attention. And if you’re going to take a swing in this market, let it be in the one sector that Wall Street is still buying—regardless of what the rest of the market is doing.
