The SPDR Utilities ($XLU) has posted strong gains in 2016 so far. As the chart below shows, XLU is up more than 11% for the year.
XLU benefited at the start of this year as sentiment on risk assets turned negative. Being a defensive sector, utilities benefit when there is volatility in markets. The question though is will the sector continue its gains if the Federal Reserve hikes benchmark interest rates at its June meeting.
XLU had seen a sharp pullback ahead of the December rate hike as the chart below shows. I believe that given the strong gains we have seen in XLU this year, it might be a good time to take profit.