In a recent conversation with investors, one asked how the increased demand for artificial intelligence might affect electric utilities. Could the current infrastructure support the surge in power demand, or would it require significant capital expenditure to expand generating capacity? Would this be a boon or a burden for electric companies? Ultimately, should investors consider overweighting their portfolios with electric utility stocks?
Their spouse then posed a thoughtful follow-up: Isn’t this just trying to time the market? You think something will go up, so you buy now before you miss the rally.
Welcome to the fine line between tactical investment moves and timing the market.
Timing the market refers to the strategy of attempting to predict future market movements—specifically, when to buy low and sell high in an effort to maximize returns. The goal is to get in before prices rise and out before they fall. Investors who attempt to time the market typically rely on economic indicators, geopolitical events, and market sentiment to anticipate when the market might rise or decline.
We advocate time in the market, not timing the market. A long-term, buy-and-hold strategy involves staying invested through market ups and downs. While past performance is not indicative of future results, history indicates that markets generally trend upward over time despite short-term volatility. Additionally, we aim to reduce that volatility through diversification, spreading investments across industries, market capitalizations, geographic regions, and growth and value styles, because not all equities move in lockstep.
These long-term decisions—what we refer to as strategic portfolio moves—are grounded in our financial strength criteria. We further narrow our scope by evaluating liquidity, growth, and relative value. From there, we analyze individual stocks based on fundamentals such as financials, business risk, market share, and growth prospects. After this analysis, we construct a portfolio designed to weather current and future economic conditions, that is also aligned with an investor’s financial goals, risk tolerance, time horizon, and investment philosophy.
That’s not to say you can’t take advantage of the current environment. Tactical portfolio moves are shorter-term adjustments responding to market conditions, economic trends, or perceived opportunities. A sound understanding of the economic climate and how it influences stock price movement is essential, along with awareness of industry trends and investor psychology. Consider that by the time you recognize a trend in the economy, the initial rise may have already occurred, and you could end up paying a premium.
As for capitalizing on utilities, the economy has seen increased electricity sales to data centers, particularly in AI-focused regions. Capital expenditure is also a key driver of growth for utility companies, as costs can typically be transferred to customers through rate adjustments. Moreover, utilities often serve as a defensive investment—if the broader economy slows, consumers may delay purchasing new electronics, but they’ll keep the lights on and the AC running.
If you’re diversified through an index fund or structured your portfolio to reflect index weightings, remember that utilities represent only about 2.5% of the S&P 500. Depending on your economic outlook, interest in dividends, and risk tolerance, slightly overweighting utilities could be beneficial. However, it’s essential to evaluate individual companies based on their fundamentals, regional exposure, and how their growth potential compares to their valuation.
If you have questions on how specific tactical moves might benefit your portfolio, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Listen to the May 17, 2025 “Henssler Money Talks” episode.
This article is for demonstrative and academic purposes and is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
